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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER , 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MCAFEE.COM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7375 77-0503003
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) NUMBER)
</TABLE>
2805 BOWERS AVENUE
SANTA CLARA, CA 95051
(408) 572-1500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SRIVATS SAMPATH
CHIEF EXECUTIVE OFFICER
MCAFEE.COM CORPORATION
2805 BOWERS AVENUE
SANTA CLARA, CA 95051
(408) 572-1500 (PHONE)
(408) 572-1559 (FAX)
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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JEFFREY D. SAPER, ESQ. GREGORY M. GALLO, ESQ.
KURT J. BERNEY, ESQ. PAUL A. BLUMENSTEIN, ESQ.
WILSON SONSINI GOODRICH & ROSATI GRAY CARY WARE & FREIDENRICH LLP
PROFESSIONAL CORPORATION 400 HAMILTON AVENUE
650 PAGE MILL ROAD PALO ALTO, CA 94301
PALO ALTO, CA 94304 (650) 328-6561
(650) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
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Class A Common Stock, $.001 par value per share........ $57,500,000 $15,985
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (Subject to Completion)
Issued , 1999
Shares
[MCAFEE.COM LOGO]
CLASS A COMMON STOCK
------------------------
MCAFEE.COM CORPORATION IS OFFERING SHARES OF ITS CLASS A COMMON
STOCK. THIS IS OUR INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS
FOR OUR SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE
BETWEEN $ AND $ PER SHARE.
------------------------
WE HAVE APPLIED TO LIST OUR CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "MCAF."
------------------------
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
------------------------
PRICE $ A SHARE
------------------------
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<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS MCAFEE.COM
-------- ------------- -----------
<S> <C> <C> <C>
Per Share......................................... $ $ $
Total............................................. $ $ $
</TABLE>
McAfee.com has granted the underwriters the right to purchase up to an
additional shares of Class A common stock to cover over-allotments.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on
, 1999.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
------------------------
MORGAN STANLEY DEAN WITTER
BANCBOSTON ROBERTSON STEPHENS
HAMBRECHT & QUIST
, 1999
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................. 3
Risk Factors........................ 6
Special Note Regarding
Forward-Looking Statements........ 21
Use of Proceeds..................... 22
Dividend Policy..................... 22
Capitalization...................... 23
Dilution............................ 24
Selected Financial Data............. 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 26
</TABLE>
<TABLE>
<CAPTION>
PAGE
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Business............................ 37
Management.......................... 53
Related Party Transactions.......... 62
Principal Stockholders.............. 66
Description of Capital Stock........ 67
Shares Eligible for Future Sale..... 70
Underwriters........................ 72
Legal Matters....................... 74
Experts............................. 74
Additional Information.............. 74
Index to Financial Statements....... F-1
</TABLE>
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We are a Delaware corporation. We were incorporated in December 1998 as a
wholly-owned subsidiary of Networks Associates, Inc. Effective January 1, 1999,
Network Associates contributed its consumer e-commerce business to us. Our
principal executive offices are located at 2805 Bowers Avenue, Santa Clara,
California 95051. Our telephone number at that address is (408) 572-1500. Our
world wide web address is www.McAfee.com. The information on our web site is not
incorporated by reference into this prospectus.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information that is different
from that contained in this prospectus. We are offering to sell, and seeking
offers to buy, shares of Class A common stock only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the Class A common stock.
UNTIL 1999, 25 DAYS AFTER COMMENCEMENT OF THIS OFFERING, ALL DEALERS
THAT BUY, SELL OR TRADE THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and our Class A common stock being sold in
this offering and our financial statements and notes appearing elsewhere in this
prospectus. In this prospectus, unless the context indicates otherwise,
"McAfee.com" refers to both us and our predecessor business.
We are a leading provider of PC management solutions for consumers. Through
our McAfee.com web site, we allow consumers to secure, repair, update and
upgrade their PCs online. We are among the first consumer Applications Service
Providers, or ASPs, hosting our software applications on our own servers and
providing our applications services to consumers over the Internet. Our
applications allow consumers to check their PCs for viruses, eliminate viruses
from their PCs, repair their PCs, check for Year 2000 compliance, optimize their
hard drives and update their PCs with the latest software patches and upgrades.
In addition to our web-based software applications, we offer relevant content
and contextual e-commerce services that enable users to maximize their
investment in their PCs. To date, over six million users from over 230 countries
have registered on our web site, and we have over 900,000 trial subscribers.
Increasing use of the Internet has transformed the home PC from merely a
stand-alone processor into the primary Internet access device for consumers
engaged in information retrieval, communication and e-commerce. According to
Jupiter Communications, approximately 63 million U.S. households will be online
by the year 2002, representing 59% of all U.S. households. Consumers are
increasingly dependent on their PCs to reliably access, store and manage a
growing amount of valuable and highly-sensitive data. PCs have become essential
to many users, and a PC-related failure could lead to hours of lost time and
significant financial loss. The combination of greater access to public networks
such as the Internet and increasingly sophisticated PC applications has made
both PCs and PC management more complex. Consumers, who generally lack the
knowledge and sophistication necessary to properly secure and manage their PCs
without assistance, may be overwhelmed by the variety and complexity of the
products and services that are offered to help them perform these tasks.
McAfee.com is a one-stop destination for consumer PC security and
management needs. Our web site provides a suite of online products and services
personalized for the user based on the user's PC configuration, attached
peripherals and resident software. Our integrated applications solution allows
consumers to secure and manage their PCs by visiting our McAfee Clinic,
Anti-Virus Center, PC Checkup Center, Y2K Center, Shopping Center, Download
Center and Support Center. Our web site and software applications are designed
to be easy to use and helpful for PC users of all skill levels, requiring
limited consumer input. We also provide a wealth of PC-related information and
educational materials for access and use by consumers on our web site, such as
product reviews and features, a searchable virus library, electronic
newsletters, early warning virus alert services and user-specific product and
upgrade recommendations.
Our strategic objective is to become the leading trusted online destination
where consumers secure, repair, update and upgrade their PCs and other Internet
access devices. To achieve this objective, we plan to continue aggressively
building brand awareness among consumer PC users through extensive marketing
activities and strategic alliances. We intend to drive adoption of our ASP model
by attracting new users to our web site and offering free limited-time trial
subscriptions. To become a leading and trusted online destination, we must
maintain our technological leadership and expand our target market. We plan to
do so both through increased international penetration and by developing new or
enhanced products and services for PCs and non-PC Internet access devices.
We are a wholly-owned subsidiary of Network Associates, which is a leading
supplier of enterprise network security and management software. After
completion of this offering, Network Associates will own all our outstanding
Class B common stock, representing approximately % of the voting power of
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<PAGE> 5
our outstanding stock. In addition, as of September 22, 1999, Network
Associates' officers and employees held options to purchase 1,984,150 shares of
our Class A common stock.
THE OFFERING
Class A common stock offered.............. shares
Common stock to be outstanding after the
offering:
Class A common stock.................... shares
Class B common stock.................... 36,000,000 shares
Voting rights:
Class A common stock.................... One vote per share
Class B common stock.................... Three votes per share
Use of proceeds........................... General corporate purposes,
including working capital. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.... MCAF
The number of shares of our common stock to be outstanding immediately
after the offering is based on the number of shares outstanding at June 30,
1999. This number does not take into account 4,539,850 shares of Class A common
stock issuable on exercise of options outstanding as of September 22, 1999 with
a weighted average exercise price of approximately $4.31 per share.
Except as otherwise noted, all information in this prospectus assumes no
exercise of the underwriters' overallotment option.
McAfee, McAfee Clinic, McAfee.com, VirusScan, McAfee Office, Oil Change and
ActiveShield are our trademarks or are licensed to us. This prospectus also
includes trade names, trademarks and service marks of other companies and
organizations.
Each share of our Class B common stock is convertible, at any time at the
option of the holder, into one share of Class A common stock. In addition, any
Class B common stock transferred by Network Associates to a third party would be
automatically converted into Class A common stock upon transfer.
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Set forth below is our summary historical financial and operating data for
the periods indicated. The financial and operating data for the three years
ended December 31, 1998 have been derived from our audited financial statements.
The financial and operating data as of June 30, 1999 and for each of the six
month periods ended June 30, 1998 and 1999 have been derived from the unaudited
financial statements. Prior to 1999, our business was operated by Network
Associates. Our statement of operations data for prior periods was prepared on a
carved-out basis from the financial statements of Network Associates. The
summary historical financial data set forth below should be read in conjunction
with our financial statements and notes thereto included elsewhere in this
prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The summary historical financial data set forth below is
not necessarily indicative of the results of operations or financial position
which would have resulted if we had been a separate stand-alone entity during
these periods.
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SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
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1996 1997 1998 1998 1999
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................. $ 539 $ 2,530 $ 6,292 $ 2,586 $ 9,332
Gross profit................................ 280 428 2,587 1,249 3,098
Income (loss) from operations............... (1,790) (1,508) (1,993) 217 (10,662)
Net income (loss)........................... $(1,790) $(1,508) $(1,993) $ 217 $(10,662)
Net income (loss) per share, basic and
diluted................................... $ (.05) $ (.04) $ (.06) $ .01 $ (.30)
Shares used in per share calculation........ 36,000 36,000 36,000 36,000 36,000
</TABLE>
The as adjusted column in the balance sheet data set forth below gives
effect to the sale of shares of our Class A common stock in this
offering at an assumed initial public offering price of $ per share and
the application of the estimated net proceeds from the offering. See "Use of
Proceeds."
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<CAPTION>
AS OF JUNE 30, 1999
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ACTUAL AS ADJUSTED
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(UNAUDITED)
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BALANCE SHEET DATA:
Cash........................................................ $ --
Working capital............................................. (13,943)
Total assets................................................ 14,016
Deferred revenue............................................ 19,214
Receivable from Network Associates.......................... 10,048
Stockholder's deficit....................................... (11,494)
</TABLE>
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RISK FACTORS
You should carefully consider the risks described below and the other
information in this prospectus before buying shares in this offering. If any of
the following risks actually occurs, our business, results of operations and
financial condition could be materially adversely affected, the trading price of
our common stock could decline, and you could lose all or part of your
investment.
RISKS RELATED TO OUR RELATIONSHIP WITH NETWORK ASSOCIATES
We are currently a wholly-owned subsidiary of Network Associates. We were
incorporated in December 1998 and effective January 1, 1999, Network Associates
contributed the assets of its consumer e-commerce business to us.
WE DO NOT OWN MUCH OF THE CORE TECHNOLOGY AND INTELLECTUAL PROPERTY
UNDERLYING OUR CURRENT PRODUCTS AND OUR CURRENTLY PLANNED PRODUCTS
Much of the core technology and intellectual property underlying our
current products and our currently planned products is licensed to us under a
cross license agreement with Network Associates. This agreement among other
things:
- restricts our use of the licensed technology to providing single-user
consumer licenses for our products and services sold over the Internet or
for Internet-based products and licensing the technology to original
equipment manufacturers for sale to individual consumers;
- allows Network Associates to continue to sell "shrink-wrapped" boxed
products incorporating the licensed technology through non-online
distribution channels;
- prevents us from offering products from companies other than Network
Associates if Network Associates offers a competitive product;
- grants to Network Associates a license to all technology that we create
based on the technology that we license from Network Associates;
- does not enable us to independently enforce Network Associates'
intellectual property rights in the licensed technology against third
parties; and
- allows Network Associates to terminate the cross license if we fail to
cure any material breach of the cross license within 30 days after being
notified by Network Associates of the breach, subject to mandatory
dispute resolution prior to the effectiveness of any proposed
termination.
See "Related Party Transactions -- Intercompany Agreements -- Cross License
Agreement."
We do not plan to engage in significant research and development activities
relating to our anti-virus technology. We expect to rely on Network Associates'
ongoing research and development efforts to keep our anti-virus products
up-to-date. Accordingly, we will not control whether these products will:
- continue to recognize and eliminate new computer viruses;
- incorrectly report the presence or absence of computer viruses;
- incorporate leading-edge technology; or
- be adequately protected from infringement by third parties or infringe
upon the intellectual property rights of third parties.
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OUR AGREEMENTS WITH NETWORK ASSOCIATES ARE NOT THE RESULT OF ARM'S LENGTH
NEGOTIATIONS AND AS A RESULT THE AGREEMENTS MAY BE LESS FAVORABLE TO US
THAN IF THE AGREEMENTS WERE NEGOTIATED AT ARM'S LENGTH
Our agreements with Network Associates were negotiated when we were a
wholly-owned subsidiary of Network Associates and one of our two directors at
that time was a director and the chief executive officer of Network Associates.
In addition, Srivats Sampath, our president and the other director at the time,
was employed by Network Associates prior to joining McAfee.com in December 1998.
WE MAY BE UNABLE TO PURSUE BUSINESS OPPORTUNITIES AVAILABLE TO US BECAUSE
OF OUR RELATIONSHIP WITH NETWORK ASSOCIATES
We do not currently have a policy in place with Network Associates to
govern the pursuit or allocation of business opportunities between the two
companies, except to the extent the cross license agreement restricts each party
from selling licensed products in specified markets or prevents us from offering
products based on technology competitive with that provided to us by Network
Associates under the cross license. Our ability to take advantage of a specific
business opportunity may be affected by Network Associates' representation on
our board of directors, its voting control over us and our comparatively limited
resources. As a result, we may be unable to successfully pursue business
opportunities available to both Network Associates and us.
NETWORK ASSOCIATES' ABILITY TO EXERT CONTROL OVER US FOLLOWING THIS
OFFERING COULD RESULT IN ACTIONS THAT ARE NOT CONSISTENT WITH THE INTERESTS
OF OUR OTHER STOCKHOLDERS, PARTICULARLY WITH RESPECT TO A CHANGE OF CONTROL
Network Associates' substantial voting control over us could conflict with
the interests of our other stockholders. Our capital stock consists of Class A
common stock and Class B common stock. Holders of Class A common stock are
entitled to one vote per share, and Network Associates, as the sole holder of
Class B common stock, is entitled to three votes per share. In the event that
Network Associates transfers Class B common stock to a third party, the
transferred Class B common stock automatically converts to Class A common stock
upon transfer. In this offering, we are offering shares of our
Class A common stock. Following this offering, Network Associates will own
36,000,000 shares, or 100%, of the outstanding Class B common stock,
representing approximately % of the overall voting power of our outstanding
stock. As long as the shares of Class B common stock held by Network Associates
represent more than 25% of our outstanding voting capital stock, Network
Associates will have a majority of the voting power represented by our
outstanding stock. This voting power will enable Network Associates to:
- elect our entire board of directors, subject to Network Associates'
contractual obligation to vote in favor of at least two independent
directors, and as a result, control matters requiring board approval;
- control matters submitted to a stockholder vote, including mergers and
consolidations with third parties and the sale of all or substantially
all of our assets; and
- otherwise control or influence the business direction and policies of
McAfee.com.
In light of its voting control and board influence, Network Associates will
have significant influence over matters requiring approval of our board of
directors and stockholders. Two of our current board members are affiliated with
Network Associates. William Larson is Network Associates' Chief Executive
Officer and Prabhat Goyal is Network Associates' Chief Financial Officer. Our
business could be adversely affected if these directors act in favor of Network
Associates' interests over ours while on our board of directors.
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Network Associates' voting control and board influence may have the effect
of discouraging many types of transactions involving a change of control,
including transactions in which the holders of Class A common stock might
otherwise receive a premium for their shares over the then-current market price.
In addition, we have elected not to be subject to Section 203 of the Delaware
General Corporation Law, which would otherwise provide certain restrictions on
"business combinations" between us and any party acquiring a 15% or greater
interest in our voting stock other than in a transaction approved by our board
of directors and in certain cases by our stockholders. As a result, for example,
as long as Network Associates owns more than 50% of the outstanding common
stock, Network Associates could effect a change in control of McAfee.com through
sales of its shares without our other stockholders having an opportunity to
participate in the transaction.
BECAUSE NETWORK ASSOCIATES CONSOLIDATES OUR OPERATING RESULTS WITH ITS OWN,
IT MAY ATTEMPT TO RESTRICT OUR EXPENDITURES, WHICH COULD ADVERSELY AFFECT
OUR BUSINESS IN THE LONG TERM
As long as Network Associates owns common stock having at least a majority
of our voting power, it will continue to consolidate our operating results with
its own for accounting purposes. Our business strategy will require us to incur
large expenses resulting in significant losses as we attempt to establish our
brand by increasing our marketing efforts and establishing strategic
relationships. Incurring large expenses for these purposes may conflict with
Network Associates' interests in maximizing its net earnings, and Network
Associates may attempt to influence our expenditures in a manner that limits our
losses in the short term but may not be in our best interests in the long term.
WE RELY ON NETWORK ASSOCIATES TO ADEQUATELY PROTECT AND DEFEND OUR LICENSED
TECHNOLOGY AND INTELLECTUAL PROPERTY AND ANY FAILURE BY NETWORK ASSOCIATES
TO DO SO COULD ADVERSELY AFFECT OUR BUSINESS
We rely on Network Associates to protect the technology and intellectual
property that it licenses to us through a combination of patent, trademark,
trade secret and copyright law and contractual restrictions. Despite Network
Associates' precautionary measures, third parties could copy or otherwise obtain
or use the licensed technology and intellectual property without authorization.
Our cross license agreement with Network Associates does not permit us to take
independent legal action against third parties to enforce Network Associates'
rights in the licensed technology. Network Associates has been, currently is and
in the future may be, subject to litigation related to the technology licensed
to us. Adverse determinations in that litigation could:
- result in the loss of Network Associates', and as a result our,
proprietary rights, which could prevent us from selling our products;
- subject us to significant liabilities; or
- require Network Associates and/or us to seek licenses from third parties.
OUR BUSINESS MAY BE HARMED BY THE LITIGATION TO WHICH NETWORK ASSOCIATES IS
A PARTY WITH RESPECT TO ANTI-VIRUS TECHNOLOGY IT LICENSES TO US
Symantec, Hilgraeve and Trend Micro have each filed suit against Network
Associates with respect to the anti-virus technology that we license from
Network Associates. Network Associates has indicated that it believes it has
valid defenses to these actions and intends to defend them vigorously. In
addition to naming Network Associates as a defendant in these litigation
matters, these claimants may seek to name us as a defendant in related actions
and seek damages from us. Under the terms of an indemnification agreement with
Network Associates, it has agreed to indemnify and defend us and hold us
harmless from any losses as a result of these or other intellectual property
claims known prior to the consummation of this offering. The litigation process
is subject to inherent uncertainties and we and/or Network Associates may not
prevail in these matters, or we and/or Network Associates may be unable to
obtain
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licenses with respect to any patents or other intellectual property rights of
third parties that may be held valid or infringed upon by us through our use of
intellectual property licensed to us by Network Associates. Uncertainties
inherent in the litigation process include, among other things, the complexity
of the technologies involved, potentially adverse changes in the law and
discovery of facts unfavorable to Network Associates or McAfee.com. In addition,
any involvement in legal actions regarding our intellectual property rights
could be expensive and could distract our management from our day-to-day
operations.
BECAUSE WE LICENSE OUR ANTI-VIRUS AND OTHER TECHNOLOGY FROM NETWORK
ASSOCIATES, OUR ABILITY TO COMPETE IN OUR MARKETS DEPENDS IN PART ON THE
SUCCESS OF NETWORK ASSOCIATES' RESEARCH AND DEVELOPMENT
Under our cross license agreement with Network Associates, Network
Associates licenses to us all future improvements based on the licensed
technologies. Our research and development efforts will initially focus on
adapting the licensed technology for sales of products and services over the
Internet. Specifically, we do not plan to undertake independent research and
development efforts relating to the anti-virus technology licensed from Network
Associates but instead plan to rely on future improvements developed by Network
Associates. As a result, our ability to introduce additional or enhanced
anti-virus products is directly impacted by the success of Network Associates'
related research and development efforts. If Network Associates does not commit
sufficient resources to these efforts, or if its efforts are unsuccessful or
untimely, the quality of our anti-virus products would suffer and we would be
required to commit significant resources to our own research and development
efforts. If we are required to do so, our ability to maintain any technological
leadership currently provided by Network Associates would be severely
constrained by our relatively limited capital resources, engineering
capabilities and other resources necessary to timely develop and introduce
additional or enhanced anti-virus products. This would significantly harm our
competitive position and business.
BECAUSE WE SHARE THE MCAFEE BRAND WITH NETWORK ASSOCIATES, ITS ACTIVITIES
RELATED TO ITS MCAFEE-BRANDED PRODUCTS COULD HARM OUR BRAND AND OUR
COMPETITIVE POSITION
The value of our McAfee.com brand is closely linked to the reputation of
Network Associates' McAfee-branded software, such as VirusScan. Network
Associates owns the McAfee trademark and will continue to maintain the right to
control the sale of McAfee and other Network Associates-branded "shrink-wrapped"
boxed software into non-online channels. Our McAfee.com brand and competitive
position could be harmed by:
- publicity surrounding inadequate levels of consumer support for, or poor
performance of, Network Associates' McAfee-branded products, particularly
McAfee VirusScan; and
- customer confusion related to Network Associates' continued sale of
McAfee-branded shrink-wrapped boxed products in non-online channels.
WE RELY ON NETWORK ASSOCIATES TO PROVIDE CRITICAL SERVICES TO US, AND ANY
FAILURE ON ITS PART TO EFFECTIVELY DO SO COULD ADVERSELY AFFECT OUR
BUSINESS
We currently rely on Network Associates for cash management, tax and
payroll administration, insurance, employee benefits administration and other
services. We have entered into agreements with Network Associates for the
continued provision of these services and other services after this offering. If
these agreements are terminated or if Network Associates fails to satisfactorily
provide these services, we would be required to provide these services
internally or find a third-party provider of these services. Any services we
choose to provide internally may not be as cost-effective as those that Network
Associates is currently providing, particularly in light of our lack of
experience as an independent organization. If we are required to obtain these
services from a third party, we may be unable to do so in a timely, efficient
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and cost-effective manner, or the services we receive may be inferior to those
that Network Associates is currently providing.
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF LOSSES AND EXPECT FURTHER LOSSES
Our business has incurred aggregate net losses since inception. As of June
30, 1999, we had an accumulated deficit of approximately $16 million. We expect
to continue to incur significant net operating losses for the foreseeable
future. We may never become profitable, or if we do earn a profit in any period,
we may be unable to sustain or increase our profitability on a quarterly or
annual basis. It is critical to our success that we continue to devote
financial, sales and management resources to developing brand awareness for our
web site and our online PC security and management products and services. As a
result, we expect that our operating expenses will increase significantly during
the next several years, as we incur additional expenses related to:
- development, marketing and promotion of products and services;
- development of our web site and related infrastructure;
- development and maintenance of strategic relationships; and
- increased employee headcount.
With the addition of these operating expenses, we will need to generate
significant additional revenues to achieve profitability.
OUR APPLICATIONS SERVICE PROVIDER BUSINESS MODEL IS UNPROVEN AND OUR
SUCCESS DEPENDS ON MARKET ACCEPTANCE OF OUR HOSTED APPLICATIONS
Historically, substantially all of our revenue has come from software sales
through our web site and other online resellers, such as Beyond.com. Our current
strategy is to expand upon this base and broaden our role as an Applications
Service Provider, or ASP, providing consumers with online access to PC security
and management software applications hosted on our servers. Under this ASP
model, consumers "rent versus buy" the software. We are among the first
consumer-focused ASPs, and this concept may not achieve acceptance in the
market. We began providing our application services online in October 1998 when
we introduced our Oil Change online subscription service based on technology we
acquired when CyberMedia, Inc. was acquired by Network Associates. In April
1999, we significantly redesigned our web site and introduced our McAfee Clinic
hosted services. To build awareness and demand for our hosted products and
services, we offered our McAfee Clinic and other products and services for free
prior to September 2, 1999, when we began charging a subscription fee for McAfee
Clinic. Consumer acceptance of our hosted products and services is highly
uncertain and subject to a number of potential factors, including:
- consumers' reluctance to change their software purchasing behavior in
favor of services hosted on our servers;
- consumer concerns regarding the effectiveness of hosted PC products and
services compared with software that is entirely resident on a user's PC;
- unwillingness by consumers to incur ongoing subscription fees for hosted
products and services previously offered for free;
- consumer concerns about whether the Internet is fast and reliable enough
to deliver critical PC security and management functions effectively; and
- our ability to properly price our products and services to generate the
greatest revenue potential.
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Our online services are designed to protect consumer privacy by ensuring
that all PC scans are done locally at the PC, all information about the user's
PC is transmitted to us anonymously and no scanned data is stored by us.
However, consumers' misconceptions about this process could prevent our ASP
model from achieving market acceptance.
ANY FAILURE TO SUCCESSFULLY EXPAND OUR CONTEXTUAL E-COMMERCE SERVICES COULD
LIMIT OUR POTENTIAL GROWTH
We plan to expand our contextual e-commerce services, in which we provide
product recommendations based on a customer's particular PC, attached hardware,
such as printers and monitors, internal peripheral devices, such as hard drives
and graphics cards, and resident software, such as Windows 95 and Quicken. We
will be unable to successfully complete the rollout of our contextual e-commerce
services unless we take the following actions:
Provide Proper System Scanning. The software initially downloaded to the
consumer's PC from our web site must accurately scan the user's PC system and
identify the consumer's PC configuration. Only after proper scanning can we
provide relevant online product recommendations for the hardware, software and
other products covered by our product database.
Obtain Relevant Content. For our recommendations to be accurate, we must
successfully obtain and maintain:
- relationships with vendors, such as hardware and software distributors,
who agree to have their products included in our database of products we
recommend to consumers for purchase;
- interoperability information to ensure that our recommended products are
compatible with the consumer's PC system; and
- relationships with third party providers of information, such as product
reviews and ratings, about the products included in our contextual
product database.
To date we have secured only a limited amount of the content needed to
successfully provide our contextual e-commerce services. To obtain this content,
particularly online product information, product reviews and interoperability
information, we may have to pay fees or enter into revenue-sharing agreements.
We may not be successful in our efforts to enter into mutually satisfactory
revenue-sharing arrangements with content providers.
Establish Revenue-Generating Arrangements with Vendors. We must
successfully negotiate revenue-generating arrangements with our vendors.
Potential revenue-generating arrangements with our vendors may include:
- a referral fee or a share in the product revenue based on the type and
value of products purchased as a result of our product recommendation;
- guaranteed minimum payments paid by participating vendors in exchange for
their inclusion in our contextual product database, perhaps on an
exclusive basis depending on the product;
- slotting fees paid by vendors to ensure that their products receive
preferential listing in our list of recommended products; and
- licenses of our technology to strategic partners in exchange for license
fees or revenue sharing.
We may be unable to establish and maintain mutually satisfactory revenue
generating arrangements. E-commerce is a relatively new concept and our ability
to enter into these arrangements and their success is dependent on the degree to
which e-commerce is broadly adopted by consumers.
Establish Consumer Trust and Generate Related Revenue. We must establish
consumer trust and generate related revenue through our contextual e-commerce
services. To do so, we must successfully
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and consistently recommend a broad selection of high-quality and reliable
products at competitive prices. In addition, for us to generate revenue through
our contextual e-commerce services, consumers must purchase the products
recommended by our service. We believe that a significant number of consumers
will use our service to gather product recommendations and information and
purchase products from sources with whom we do not have revenue sharing
relationships, such as traditional retail channels or non-partner online
sources. If our vendors offer low-quality or unreliable products or do not
properly distribute and support their products, consumers could lose trust in
us. Consumers could also lose trust in us as a result of our only recommending
the products of vendors who have separately agreed to be included in our
database or giving priority to those vendors who have paid us a slotting fee for
preferential treatment.
WE PLAN TO INTRODUCE CONTEXTUAL ADVERTISING, AND THE FAILURE OF THIS
SERVICE COULD ADVERSELY AFFECT OUR BUSINESS
Contextual advertising is based on selling advertising targeted to
consumers based on their PC configuration, attached peripherals and resident
software. We will be unable to successfully introduce and maintain our
contextual advertising product unless we take the following actions:
Provide Proper System Scanning. Our scanning software must accurately scan
the user's PC system in order to provide relevant targeted advertisements.
Obtain Advertisers Willing to Pay a Premium for Targeted
Advertisements. The market for contextual advertising is still developing and
advertisers may be unwilling to utilize contextual advertising or pay a premium
for this product. Our ability to charge higher rates for contextual advertising
is subject to a number of factors including the number and demographics of the
users of our web site, the amount of time users spend on our web site and the
degree to which users of our web site purchase the advertised products.
ANY FAILURE ON OUR PART TO DEVELOP, MAINTAIN AND ENHANCE STRATEGIC
RELATIONSHIPS WILL LIMIT OUR ABILITY TO EXPAND OUR DISTRIBUTION AND GROW
OUR BUSINESS
Our distribution strategy will require us to develop and maintain strategic
relationships with third parties including Internet portals, Internet shopping
sites, and Internet access providers. We currently have a relationship with
Beyond.com, which is the largest reseller of our software and the exclusive
reseller of third-party software sold on our web site. We believe that the
maintenance and enhancement of this relationship and the establishment of
additional strategic relationships will be critical if we are to expand our
business. Although we intend to pursue additional strategic relationships in the
future, these efforts may not be successful. To secure and maintain key
strategic relationships, we may be required to pay significant fees and/or grant
exclusive rights. Even if we do succeed in establishing these relationships,
they may not result in our generating additional subscriber or customer
relationships or increased revenues.
OUR MANAGEMENT TEAM WAS ONLY RECENTLY FORMED, AND OUR SUCCESS DEPENDS UPON
THEIR ABILITY TO WORK EFFECTIVELY TOGETHER AND OUR ABILITY TO RETAIN THEM
Because our senior management currently consists of individuals who have
worked together for a relatively short period of time, our management may be
unable to work together effectively. We are substantially dependent on the
continued services of our senior management and other key personnel. We do not
have long-term employment agreements with any of our senior management or key
personnel and we do not maintain any "key person" life insurance policies. If
our management team fails to work together effectively, or if we lose the
services of any member of senior management or key personnel, our business could
be harmed.
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OUR FAILURE TO HIRE AND RETAIN KEY MANAGEMENT PERSONNEL AND OTHER QUALIFIED
INDIVIDUALS COULD HARM OUR BUSINESS
In addition to retaining and motivating our current management and
technical employees, we must attract and train new employees in key areas of our
company, including marketing and sales, research and development and web
information technologies functions. We may be unable to successfully attract,
train, retain and motivate key management personnel and other highly skilled
technical, sales and marketing and customer support personnel. Competition for
these individuals is intense, especially in the San Francisco Bay Area. If we
fail to either retain our current employees, or fail to attract and train new
employees, our business could be harmed.
OUR INABILITY TO EFFECTIVELY MANAGE OUR WEB SITE TRAFFIC AND INFORMATION
TECHNOLOGY INFRASTRUCTURE COULD HARM OUR BUSINESS
Since the launch of our web site in December 1998, we have experienced
significant growth and fluctuations in traffic to our web site. To meet
increased traffic demands and potential future traffic increases, we recently
expanded our information technology, or IT, infrastructure and continue to add
additional infrastructure based on our anticipated requirements for the
following six months.
We have experienced significant temporary increases in traffic to our web
site in response to particular events, such as the Melissa and Chernobyl
computer virus outbreaks in the first half of 1999. To respond to sudden traffic
increases, we must expand and maintain the capacity of our IT infrastructure. In
addition, we need to anticipate and prepare for increased traffic to our web
site as the Year 2000 approaches and consumers increasingly visit our free Y2K
Center. If we are unable to effectively expand our IT infrastructure to
accommodate traffic increases, consumers may experience difficulties in
accessing our web site or in downloading products and information from our web
site. This could materially harm our business.
We have agreed to provide IT infrastructure to Network Associates and to
manage its web site. Increases in traffic on the Network Associates web site
could adversely impact access to and responsiveness of our web site. The impact
of traffic increases would likely be most severe during unanticipated events
such as virus outbreaks.
Currently, Beyond.com provides electronic distribution for software
products sold on our web site. If we were to elect to provide our own electronic
distribution of these products and the related updates and upgrades, we would
need to increase our IT infrastructure.
WE RELY ON BEYOND.COM FOR SOFTWARE LICENSE SALES AND PRODUCT FULFILLMENT,
AND ANY FAILURE BY BEYOND.COM TO PERFORM THIS SERVICE EFFECTIVELY COULD
ADVERSELY AFFECT OUR BUSINESS
During the six months ended June 30, 1999, approximately 42% of our net
revenue was derived from the sale of our software licenses through Beyond.com.
Included in these revenues are software licenses sold on our web site for which
Beyond.com acts as a reseller and provides product fulfillment. Beyond.com
provides fulfillment for these products whether they are distributed
electronically by Beyond.com or in "shrink-wrapped" box format shipped to
customers. We have agreed that Beyond.com has the exclusive right to resell
traditional software licenses for our products on our web site until June 30,
2000. If Beyond.com does not provide these services in a timely and satisfactory
manner, we would be required to replace Beyond.com and our business could be
harmed.
WE EXPECT OUR QUARTERLY FINANCIAL RESULTS TO BE SUBJECT TO SIGNIFICANT
FLUCTUATIONS THAT COULD CAUSE OUR STOCK PRICE TO DECLINE
We expect that our quarterly operating results will fluctuate significantly
in the future based upon a number of factors, many of which are not within our
control. We plan to significantly increase our
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operating expenses to expand our marketing and sales activities and expand our
operating infrastructure. We base our operating expenses on anticipated market
growth and our operating expenses are relatively fixed in the short term. As a
result, if our revenues are lower than we expect, our quarterly operating
results may not meet the expectations of public market analysts or investors,
which could cause the market price of our common stock to decline.
Our quarterly operating results may fluctuate in the future as a result of
many factors, including the following:
- the number of visitors to our web site, the proportion of visitors that
become registered users, the proportion of registered users that convert
to paying online subscribers and the rate at which they renew their
subscriptions;
- seasonality, such as during summer months, when Internet usage is
typically lower;
- the number of visitors to our web site who purchase products offered
through our web site and the mix of products purchased;
- the amount and timing of our operating expenses and capital expenditures;
- the percentage of revenue which is deferred, which may fluctuate based on
the change in product mix and/or pricing; and
- costs related to potential acquisitions of businesses or technologies.
Our financial statements are derived from the historic books and records of
Network Associates. Furthermore, although historically substantially all of our
revenues have come from traditional software sales, our current strategy is to
expand our role as an ASP, providing consumers with online access to software
applications hosted on our servers. For these reasons, we do not believe that
our historical operating results are representative of our business model going
forward. As a result, you should not rely on comparisons of our historical
operating results as an indicator of our future performance.
THE GROWTH OF OUR BUSINESS DEPENDS SUBSTANTIALLY UPON THE CONTINUED DEMAND
FOR OUR ANTI-VIRUS PRODUCTS AND SERVICES
We believe that to date a substantial portion of the traffic to our web
site has been generated by consumer demand for our anti-virus products and
services. A decline in the demand for, or the price that consumers are willing
to pay for, our anti-virus products and services as a result of competition, an
erosion of brand loyalty, perceived degradation in product quality,
technological changes, the bundling by third parties of anti-virus functionality
into their products or services or other factors would harm our business and
operating results. We license the technology underlying our anti-virus products
and services from Network Associates and we are therefore dependent on the
continued quality and availability of Network Associates' anti-virus technology.
OTHER VENDORS MAY INCLUDE PRODUCTS SIMILAR TO OURS IN THEIR HARDWARE OR
SOFTWARE AND RENDER OUR PRODUCTS OBSOLETE
Vendors of hardware and of operating system software or other software,
such as e-mail software, may enhance their products or bundle separate products
to include PC security and management software similar to our products. The
widespread inclusion of products that perform the same or similar functions as
our products within computer hardware or other software could render our
products obsolete. Even if these incorporated products are inferior or more
limited than our products, consumers may nevertheless believe that the
incorporated products eliminate the need to purchase our products separately. If
we are unable, either directly or indirectly through Network Associates, to
develop new PC security and management products to further enhance operating
systems or other software and to successfully replace any obsolete products, our
business would suffer.
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IF OUR PRODUCTS AND SERVICES ARE NOT EFFECTIVE, OUR REPUTATION AND BUSINESS
MAY BE HARMED AND CONSUMERS MAY MAKE PRODUCT LIABILITY CLAIMS AGAINST US
Our PC security and management software products and services are used to
protect and manage PCs. If these products and services are not effective, our
reputation will be harmed and demand for our products and services could
decrease, which would materially adversely affect our business. As a result, we
could face potential product liability and related claims. Our anti-virus
products and services may fail to effectively detect and respond to existing or
newly developed computer viruses. In addition, our anti-virus technology may
cause a "false alarm" by detecting viruses that do not actually exist. Our PC
management services may not perform effectively, causing a consumer to
accidentally lose or delete a file and other data. Any of the foregoing events
could harm our reputation and our business and could lead to claims against us.
This risk is especially acute for anti-virus software because of the rate at
which new viruses are introduced, the challenges involved in widely distributing
software updates before customers have been infected by new viruses, and the
severity of the harm that consumers may suffer as a result of viruses. Because
we license the technology underlying our anti-virus products and services from
Network Associates, the quality of these products and services depends on
Network Associates' research and development efforts. We seek to limit our
exposure to potential product liability claims through limitation of liability
provisions in our electronic and shrink wrap licenses and through disclaimers.
However, these measures, particularly those involving unsigned licenses, may not
be effective under the laws of some jurisdictions.
IF MICROSOFT TECHNOLOGY FAILS TO MAINTAIN ITS MARKET SHARE OUR BUSINESS
WILL BE ADVERSELY AFFECTED
Currently, our online services are designed exclusively for PCs running
Microsoft's Windows 95, Windows 98 and Windows NT operating systems. For our
browser interface, we utilize Microsoft's Internet Explorer technology. We do
not support Netscape browser technology except through use of specialized
software, commonly referred to as "plug-ins," that must be downloaded over the
Internet, a potentially time-consuming and complicated process. For such
plug-ins to work, Microsoft's Internet Explorer must reside on the user's PC. If
Microsoft's technology fails to continue to be broadly accepted by consumers, or
if consumers migrate to other technologies that we do not support, our business
would be harmed.
OUR MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE, AND TO COMPETE WE NEED
TO ADAPT TO THESE CHANGES, CONTINUE TO DEVELOP OUR PRODUCTS AND SERVICES
AND ENHANCE THE CONTENT ON OUR WEB SITE
The market for Internet products and services is subject to rapid
technological developments, evolving industry standards and consumer demands,
and frequent new product introductions and enhancements. To remain competitive,
we must continue to enhance and improve the ease of use, responsiveness,
functionality and features of our web site. These efforts may require us to
internally develop increasingly complex technologies or license them from either
Network Associates or other parties. Developing and integrating new products,
services or technologies into our web site could be expensive and
time-consuming. Any new features, functions or services may not achieve market
acceptance or enhance our brand loyalty. If we fail to develop and introduce or
acquire new features, functions or services effectively on a timely basis, we
may be unable to continue to attract new users or to retain our existing users.
Furthermore, we may not succeed in incorporating new Internet technologies, or
to do so, we may incur substantial expenses. We must also work with strategic
partners to expand and enhance the content on our web site.
COMPETITION FROM OTHER COMPANIES THAT OFFER PC SECURITY AND MANAGEMENT
SERVICES COULD REDUCE OUR NET REVENUE AND MARKET SHARE
A large number of Internet companies compete for users, advertisers,
e-commerce transactions and other sources of online revenue. The market for PC
security and management products is intensely
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competitive and we expect competition to increase in the near-term. Competitive
factors affecting our market include:
- relatively low barriers to entry, allowing current and new competitors to
launch new Internet sites at a relatively low cost using commercially
available software;
- the ability of some of our present and future competitors to offer their
products and services for free;
- new technologies that may increase competitive pressures by enabling our
competitors to offer lower-cost services; and
- web-based applications that direct Internet traffic to web sites and
users to computer management services that compete with ours.
Increased competition could result in price reductions, diminished market
share and loss of subscribers, which could materially harm our business. We
believe that competition for consumers of PC security and management services
will continue to increase as the Internet grows as a commercial medium and as
consumer ownership of PCs and other Internet access devices becomes more
widespread. To respond to changes in the competitive environment, we may, from
time to time, make pricing, service or marketing decisions or acquisitions that
could harm our business.
In the market for anti-virus software products, we compete primarily
against Symantec and Trend Micro Systems, which offer software licenses to
anti-virus software products, including boxed products sold through retail store
channels. In the market for hosted PC security and management solutions, we also
compete primarily against Symantec and Trend Micro Systems, as well as other PC
utility vendors. In particular, Symantec and Trend Micro Systems both offer
online anti-virus services. In the future, we may also compete against PC and
system vendors such as Dell, Compaq, IBM, Gateway and Intel that may seek to
provide a higher level of support and service to their customers. In particular,
Dell has announced an online customer support initiative that includes online PC
management services. Operating system and application vendors such as Microsoft
provide or plan to provide hosted services to better manage Windows-based PCs.
Online PC content sites such as CNET and ZDNet provide or have announced their
intention to provide hosted services to enhance their web sites. We are also
aware of smaller entrepreneurial companies that are focusing significant
resources on developing and marketing these services to consumers.
In the market for e-commerce and advertising, we compete primarily with
established online retailers such as Beyond.com, Gigabuys.com, Outpost.com and
PC-related content sites such as CNET and ZDNet. We also compete with online
comparative shopping services provided by Internet sites such as Yahoo!,
Amazon.com and Excite.
Some current and many potential competitors have longer operating
histories, larger customer bases and greater brand recognition in other business
and Internet markets than we do. Some of these competitors also have
significantly greater financial, marketing, technical and other resources. Other
online computer management services may be acquired by, receive investments from
or enter into commercial relationships with larger, more established and better
financed companies. As a result, some of our competitors may be able to devote
more resources to marketing and promotional campaigns, adopt more aggressive
pricing policies and devote substantially more resources to web site and systems
development than we are able to provide. Increased competition may result in
reduced operating margins, loss of market share and diminished value of our
brand.
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OUR FAILURE TO PROPERLY MANAGE GROWTH AS WE EXPAND OUR OPERATIONS COULD
MATERIALLY HARM OUR BUSINESS
We have rapidly expanded our operations, and anticipate that we will
continue to expand our employee headcount and our business as we build our
marketing and sales team, research and development infrastructure, customer care
capabilities, general and administrative functions and web information
technologies services. Increased headcount could place a significant strain on
our management and resources. We will not be able to implement our business
strategy in a rapidly evolving market without an orderly and effective planning
and management process. Our revenues may not grow as quickly as we hope unless
we are able to implement such an orderly and effective process to manage our
expected growth.
OUR INTENDED EXPANSION INTO INTERNATIONAL MARKETS COULD EXPOSE US TO
RELATED RISKS THAT COULD HARM OUR BUSINESS
To expand our business, we intend to develop subscriber relationships with
users outside of the United States. Expansion of our business to international
consumers poses significant challenges, including the creation of non-English
language versions of our web site. Conducting business outside of the United
States is subject to additional risks, including:
- difficulties related to online payment processing, including foreign
currency issues and transacting with consumers who do not have credit
cards;
- currency fluctuations;
- the burden of complying with foreign laws, including evolving privacy
laws of Europe, which may include restrictions on e-mail marketing;
- difficulties in securing an international provider of fulfillment
services for shrink-wrapped software; and
- political or economic instability or constraints on international trade.
Any of the foregoing factors could adversely affect our future
international operations, and as a result, harm our business and financial
results.
WE MAY FACE LIABILITY RELATING TO CONTENT ON, OR PRODUCTS AND SERVICES SOLD
FROM, OUR WEB SITE
Our web site provides third-party content and links to other web sites. We
could be exposed to claims related to copyright or trademark infringement,
errors or omissions or other wrongful acts by the third parties whose content we
provide or whose web sites are linked with ours. We enter into agreements with
other companies under which we share revenues resulting from advertising or the
purchase of products or services through direct or indirect links to or from our
web site. These arrangements may expose us to additional legal risks and
uncertainties, including government regulation and potential liabilities to
consumers of these products and services, even if we do not provide the products
and services ourselves.
IF WE ARE UNSUCCESSFUL IN PROTECTING OUR INTELLECTUAL PROPERTY AND
PROPRIETARY RIGHTS, WE MAY BE UNABLE TO PREVENT THIRD PARTIES FROM USING
THESE RIGHTS AND WE MAY LOSE THESE RIGHTS OR BE REQUIRED TO PAY DAMAGES OR
ROYALTIES
We regard substantial elements of our web site and the underlying
technology as proprietary. Despite our precautionary measures and those of
Network Associates, it is possible that third parties could copy or otherwise
obtain and use our proprietary information without authorization or develop
similar technology independently, and the intellectual property laws on which we
rely may be ineffective in preventing such unauthorized copying or use.
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Other companies may own, obtain or claim trademarks that could prevent,
limit or interfere with our use of the trademark that we use. The McAfee.com web
site address, or domain name, and the McAfee trademark are important to our
business and are licensed to us by Network Associates. If we were to lose the
McAfee.com domain name or the use of this trademark, our business would be
harmed and we would need to devote substantial resources towards developing an
independent brand identity.
From time to time, third parties may claim that our products and services
infringe upon their rights. These claims might require us to pay damages or
royalties. Any infringement claims, with or without merit, could lead to costly
litigation that could absorb significant management time and require substantial
expenses.
Legal standards relating to the validity, enforceability and scope of
protection of proprietary rights in Internet-related businesses are uncertain
and evolving, and we can give no assurance regarding the future viability or
value of any of our proprietary rights.
IF WE, OR THIRD PARTIES ON WHICH WE RELY, FAIL TO ACHIEVE YEAR 2000
COMPLIANCE, OUR BUSINESS COULD BE HARMED
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January 1,
2000, computer systems and software used by many companies and organizations in
a wide variety of industries may produce erroneous results or fail unless they
have been modified or upgraded to process date information correctly. We could
be impacted by Year 2000 issues occurring in our own infrastructure or the
infrastructure of our suppliers, vendors and financial service organizations.
These Year 2000 issues could include information errors and significant
information system failures. Any disruption in our operations as a result of
Year 2000 issues could materially harm our business. In addition, Year 2000
compliance efforts may involve significant time and expense. We are dependent on
Network Associates' Year 2000 compliance efforts for the technology that we
license from them. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000 Compliance."
INTERNET INDUSTRY RISKS
IF USE OF THE INTERNET DOES NOT CONTINUE TO GROW, OUR MARKET AND ABILITY TO
SELL OUR PRODUCTS AND SERVICES WILL BE HARMED
If the Internet develops more slowly than we expect as a medium of
commerce, our business may not develop. Broad acceptance and adoption of the
Internet by consumers and businesses for our online PC products and services
will only occur if the Internet provides them with more efficient and cost
effective methods of obtaining the current and future products and services
offered by McAfee.com.
GOVERNMENT LEGISLATION AND REGULATION OF THE INTERNET MAY LIMIT THE GROWTH
OF OUR BUSINESS AND OUR ABILITY TO MARKET OUR PRODUCTS AND SERVICES
A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, including online
content, user privacy, direct mail marketing, access charges, liability for
third-party activities and jurisdiction. Additionally, it is uncertain how
existing laws will be applied to the Internet. The adoption of new laws or the
application of existing laws may decrease the growth in the use of the Internet,
which could in turn decrease the usage and demand for our services or materially
increase our cost of doing business.
Some local telephone carriers have asserted that the increasing popularity
and use of the Internet has burdened the existing telecommunications
infrastructure, and that many areas with high Internet use have begun to
experience interruptions in telephone service. These carriers have petitioned
the Federal
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Communications Commission to impose access fees on Internet service providers
and online service providers. If access fees are imposed, the costs of
communicating on the Internet could increase substantially, potentially slowing
the increasing use of the Internet. This could in turn decrease demand for our
services or materially increase our cost of doing business.
A number of European countries have enacted laws restricting the marketing
of products and services using e-mail. These restrictions could hinder or
restrict the sales and marketing of our products and services in Europe. If
similar restrictions were also adopted in the United States or other countries,
our business would be materially harmed.
TAXATION OF INTERNET TRANSACTIONS COULD SLOW THE GROWTH OF E-COMMERCE AND
HARM OUR BUSINESS
The tax treatment of electronic commerce is currently unsettled. A number
of proposals have been made at the federal, state and local levels and by
various foreign governments to impose taxes on the sale of goods and services
and other e-commerce activities. Recently, the Internet Tax Information Act was
signed into law, placing a three-year moratorium on new state and local taxes on
Internet commerce. However, future laws may impose taxes or other regulations on
e-commerce, which could substantially impair the growth of e-commerce and
materially and adversely affect our business.
IF THE MARKET FOR WEB ADVERTISING DEVELOPS MORE SLOWLY THAN EXPECTED, OUR
BUSINESS MAY BE ADVERSELY AFFECTED
Our ability to generate advertising revenues from selling banner
advertisements, contextual advertisements and sponsorships on our web site will
depend on, among other factors, the continued development of the Internet as an
advertising medium, the amount of traffic to our web site and our ability to
achieve and demonstrate user demographic characteristics that are attractive to
advertisers. Most potential advertisers and their advertising agencies have only
limited experience with the Internet as an advertising medium and have not
devoted a significant portion of their advertising expenditures to
Internet-based advertising. No standards have been widely accepted to measure
the effectiveness of web advertising. If these standards do not develop,
existing advertisers might reduce their current levels of Internet advertising
or eliminate their spending entirely. The widespread adoption of technologies
that permit Internet users to selectively block out unwanted graphics, including
advertisements attached to web pages, could also adversely affect the growth of
the Internet as an advertising medium. Furthermore, advertisers have
traditionally relied upon advertising media other than the Internet, such as
newsprint and magazines, and have invested substantial resources in these other
advertising methods. Therefore, advertisers may be reluctant to adopt a new
strategy and advertise on the Internet.
IF THE INTERNET INFRASTRUCTURE DOES NOT CONTINUE TO DEVELOP, THE GROWTH OF
OUR BUSINESS MAY BE ADVERSELY AFFECTED
The recent growth in Internet traffic has caused episodes of diminished
performance, requiring Internet service providers and users of the Internet to
upgrade their infrastructures. Our ability to maintain and increase the speed
with which we provide services to consumers and to increase the scope of these
services is limited by and dependent upon the speed and reliability of the
Internet. Consequently, the emergence and growth of the market for our services
is dependent on the performance of and future improvements to the Internet.
IF OUR INTERNAL NETWORK INFRASTRUCTURE IS DISRUPTED BY COMPUTER HACKERS OR
BY OTHER OCCURRENCES, OUR BUSINESS MAY BE ADVERSELY AFFECTED
Our operations depend upon our ability to maintain and protect our computer
systems, most of which are located in Santa Clara, California. Given our high
profile in the security software market, we are an attractive target for skilled
computer users commonly referred to as "hackers" who attempt to gain
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unauthorized access to computers or computer networks. In the past, we have been
a target of hackers who have, among other things, attempted to penetrate our
network security or created viruses to sabotage or otherwise attack our web
site. While to date these efforts have been discovered quickly and their adverse
impact has been limited, similar efforts or viruses may be created or replicated
in the future. In this event, our web site or users' computer systems could be
damaged and, as a result, demand for our software products may suffer. Our
relationships with our subscribers and customers may be adversely affected if
the security measures that we use to protect their personal information, such as
credit card numbers, are not effective, causing our revenues to decrease and our
business to suffer. We might be required to expend significant capital and
resources to protect against, or to alleviate, problems caused by hackers. In
addition to purposeful security breaches, the inadvertent transmission of
computer viruses could expose us to litigation or harm our reputation.
We have not experienced any material outages to date. However, our systems
are vulnerable to damage from break-ins, unauthorized access, vandalism, fire,
floods, earthquakes, power loss, telecommunications failures and similar events.
Although we maintain insurance against fires, floods and general business
interruptions, the amount of coverage may not be adequate in any particular
case.
RISKS RELATED TO THIS OFFERING
PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW
AND OUR RELATIONSHIP WITH NETWORK ASSOCIATES MAY DISCOURAGE TAKEOVER
ATTEMPTS
Certain provisions of Delaware law and our certificate of incorporation and
bylaws could have the effect of delaying or preventing a third party from
acquiring us, even if a change in control would be beneficial to our
stockholders. For example, we will have a classified board of directors whose
members serve staggered three-year terms and are removable only for cause. These
provisions could make it more difficult for a third party to acquire us, even if
doing so would benefit our stockholders. Furthermore, following this offering,
Network Associates will own 36,000,000 shares, or 100%, of our outstanding Class
B common stock, with each Class B share entitled to three votes. As a result,
Network Associates will have sufficient voting power to control the direction
and policies of McAfee.com.
FUTURE SALES OF OUR COMMON STOCK MAY AFFECT OUR STOCK PRICE
After this offering, we will have outstanding an aggregate of
shares of common stock, consisting of shares of
Class A common stock and 36,000,000 shares of Class B common stock held by
Network Associates. In addition, as of September 22, 1999, we had 4,539,850
options to purchase Class A common stock outstanding. Sales of a substantial
number of shares of common stock in the public market following this offering
could cause the market price of our common stock to decline. See "Shares
Eligible for Future Sale" for additional information.
WE MAY NEED ADDITIONAL FINANCING TO ACHIEVE OUR BUSINESS OBJECTIVES, AND IF
SUCH FINANCING IS UNAVAILABLE, OUR FINANCIAL CONDITION COULD BE HARMED
We may need to obtain additional financing to fund more rapid expansion, to
expand our marketing activities, to develop new or enhance existing services or
products, to respond to competitive pressures or to acquire complementary
services, businesses or technologies. We may also need to raise funds in the
future to meet our working capital needs. Additional financing may not be
available on terms favorable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, we may be required to lower
our operating expenses by scaling back our operations, such as reducing our
marketing and research and development expenditures.
20
<PAGE> 22
INTERNET STOCKS HAVE BEEN VOLATILE AND OUR STOCK PRICE MAY FLUCTUATE
SIGNIFICANTLY
The trading prices of many Internet stocks have experienced extreme price
and volume fluctuations. These fluctuations have often been unrelated or
disproportionate to the operating performance of these companies. The trading
price of our stock is likely to be highly volatile and may be significantly
affected by factors including actual or anticipated fluctuations in our
operating results, new products introduced by us or our competitors, conditions
and trends in the software or e-commerce industries, changes in financial
estimates by securities analysts, general market conditions and other factors.
Any negative change in the public perception of the prospects of Internet or
e-commerce companies in general could also depress our stock price regardless of
our business, prospects or operating results.
PURCHASERS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE DILUTION
Investors in this offering will experience an immediate dilution in the net
tangible book value of the common stock of $ per share, based on the number
of outstanding shares as of June 30, 1999 and an assumed initial public offering
price of $ per share.
MANAGEMENT WILL HAVE BROAD DISCRETION OVER THE USE OF THE NET PROCEEDS OF
THIS OFFERING AND MAY FAIL TO USE SUCH FUNDS EFFECTIVELY
Our management will have broad discretion over the use of the net proceeds
from this offering, and investors will be relying on the judgment of our
management regarding the application of these proceeds. Currently, anticipated
uses include general corporate purposes and working capital.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "intend," "anticipate," "believe," "estimate,"
"predict," "potential," or "continue," the negative of such terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined in the Risk
Factors section above. These factors may cause our actual results to differ
materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform such statements to actual results
or to changes in our expectations.
21
<PAGE> 23
USE OF PROCEEDS
Our net proceeds from the sale of the shares of Class A common
stock we are offering will be approximately $ million after deducting the
underwriting discounts and commissions and estimated offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that our
net proceeds will be approximately $ million.
The principal purpose of this offering is to increase our working capital
for general corporate purposes. Pending use of the net proceeds of this
offering, we intend to invest the net proceeds in interest-bearing, investment
grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future.
22
<PAGE> 24
CAPITALIZATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth (1) the actual capitalization of the Company
as of June 30, 1999 and (2) capitalization as adjusted to give effect to our
application of the estimated net proceeds of this offering at an assumed initial
public offering price of $ per share, after deducting the estimated offering
expenses and underwriting discount. This table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
--------------------
AS
ACTUAL ADJUSTED
-------- --------
<S> <C> <C>
Stockholder's equity (deficit):
Preferred stock, $.001 par value; 5,000,000 shares
authorized, no shares issued and outstanding........... $ -- $ --
Common stock:
Class A, $.001 par value; 100,000,000 shares
authorized, no shares issued and outstanding, actual;
shares issued and outstanding, as
adjusted.............................................. --
Class B, $.001 par value; 65,000,000 shares authorized,
36,000,000 shares issued and outstanding, actual;
36,000,000 shares issued and outstanding, as
adjusted.............................................. 36
Additional paid-in capital................................ 4,423
Accumulated deficit....................................... (15,953)
-------- --------
Total stockholder's equity (deficit)................. (11,494)
-------- --------
Total capitalization.............................. $(11,494) $
======== ========
</TABLE>
The data in the table above excludes 4,539,850 shares of Class A common stock
issuable on exercise of options outstanding as of September 22, 1999 with a
weighted average exercise price of $4.31 per share.
23
<PAGE> 25
DILUTION
Our net tangible book value as of June 30, 1999 was $(11.5 million) or
$(.32) per share. Net tangible book value per share is determined by dividing
the number of outstanding shares of common stock into our net tangible book
value, which is our total tangible assets less total liabilities. After giving
effect to the receipt of the estimated net proceeds from this offering, based
upon an assumed initial public offering price of $ per share and after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses, our net tangible book value as of June 30, 1999 would have
been approximately $ million, or $ per share. This represents an
immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors
purchasing shares at the initial public offering price. The following table
illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value per share as of June 30, 1999....... $(.32)
Increase per share attributable to new investors.......
-----
Net tangible book value per share after the offering...
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes as of June 30, 1999, on the basis described
above, the number of shares of common stock acquired from us by Network
Associates, our only existing stockholder, and purchased from us by investors,
the total consideration contributed by Network Associates or paid by investors
and the average amount per share contributed by Network Associates and paid by
investors purchasing shares of common stock in this offering at an assumed
initial public offering price of $ per share and before deducting the
estimated underwriting discounts and commissions and estimated offering
expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- -------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Network Associates -- sole existing
stockholder........................... 36,000,000 % $2,833,342 % $.08
New investors...........................
----------- ------ ---------- -----
Total.............................. 100.0% $ 100.0
=========== ====== ========== =====
</TABLE>
As of September 22, 1999, there were options outstanding to purchase a
total of 4,539,850 shares of Class A common stock at a weighted average exercise
price of $4.31 per share.
To the extent that any of these options are exercised or shares are issued,
there will be further dilution to new public investors. See "Capitalization,"
"Management -- Stock Plans," "Description of Capital Stock," Note 6 of
McAfee.com's notes to financial statements.
24
<PAGE> 26
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
our financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus. The statement of operations data for each of the three years
ended December 31, 1998 and the balance sheet data as of December 31, 1997 and
1998 are derived from our financial statements that have been audited by
PricewaterhouseCoopers LLP, independent accountants, and are included elsewhere
in this prospectus. The balance sheet data as of December 31, 1996 is derived
from our financial data that has been audited by PricewaterhouseCoopers LLP, not
included elsewhere in this prospectus. The statement of operations data for the
six-month periods ended June 30, 1998 and 1999 and the balance sheet data as of
June 30, 1999 are derived from our unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which we consider necessary for a fair presentation of the results of
operations for this period. The data for the interim periods is not necessarily
indicative of results that may be expected for any other interim period or for
the year as a whole.
The financial statements from 1996 through 1998 contained herein and
discussed below have been carved out from the financial statements of Network
Associates using the historical results of operations and the historical bases
of the assets and liabilities of the consumer e-commerce business of Network
Associates. We believe that the assumptions underlying the preparation of our
financial statements are reasonable. However, the financial information included
herein, particularly for periods prior to fiscal 1999, may not be indicative of
our future results of operations, financial position and cash flows or the
financial results we would have achieved if we had been a separate stand-alone
entity during these periods.
From January 1, 1999, various services have been and will continue to be
provided by Network Associates based upon a services agreement entered into
between us and Network Associates. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................................. $ 539 $ 2,530 $ 6,292 $ 2,586 $ 9,332
Cost of net revenue:
Product costs............................................. 53 142 730 55 1,781
Technology costs.......................................... 206 1,960 2,975 1,282 3,352
License fees.............................................. -- -- -- -- 1,101
------- ------- ------- ------- --------
Total cost of net revenue............................... 259 2,102 3,705 1,337 6,234
Operating expenses:
Research and development.................................. 287 326 2,661 653 2,703
Marketing and sales....................................... 1,438 1,469 1,152 38 7,453
General and administrative................................ 345 141 767 341 1,978
Stock-based compensation.................................. -- -- -- -- 1,626
------- ------- ------- ------- --------
Total operating expenses................................ 2,070 1,936 4,580 1,032 13,760
------- ------- ------- ------- --------
Income (loss) from operations............................... (1,790) (1,508) (1,993) 217 (10,662)
------- ------- ------- ------- --------
Net income (loss)........................................... $(1,790) $(1,508) $(1,993) $ 217 $(10,662)
======= ======= ======= ======= ========
Basic and diluted income (loss) per share................... $ (.05) $ (.04) $ (.06) $ .01 $ (.30)
Shares used in per share calculation........................ 36,000 36,000 36,000 36,000 36,000
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------- AS OF JUNE 30,
1996 1997 1998 1999
------- ------- ------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash........................................................ $ -- $ -- $ -- $ --
Working capital............................................. (1,777) (3,268) (5,196) (13,943)
Total assets................................................ 38 21 2,438 14,016
Deferred revenue............................................ 1,003 2,976 6,388 19,214
Receivable from (payable to) Network Associates............. (674) (275) 1,286 10,048
Total stockholder's deficit................................. (1,739) (3,247) (5,131) (11,494)
</TABLE>
25
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the financial
statements and related notes of McAfee.com appearing elsewhere in this
prospectus. The following discussion contains forward-looking statements that
involve risks and uncertainties, including, among other things, statements
regarding anticipated costs and expenses, mix of revenues, plans for introducing
new products and services to expand our revenue base. Our actual results could
differ materially from the results contemplated by these forward-looking
statements as a result of a number of factors, including those discussed below,
elsewhere in this prospectus and under "Risk Factors."
OVERVIEW
We are currently a wholly-owned subsidiary of Network Associates. We were
incorporated in December 1998 and, effective January 1, 1999, Network Associates
contributed to us its consumer e-commerce business, which began operations in
January 1996. We have never operated as an independent company. Network
Associates has provided a number of services to us and we will continue to rely
on Network Associates to provide these services after completion of this
offering. In addition, our financial statements are derived from the historical
books and records of Network Associates. The balance sheet includes all assets
and liabilities directly attributable to us which are derived from historical
cost information of Network Associates. The statement of operations includes all
revenues and expenses directly attributable to us including charges for shared
facilities, functions and services used by us and provided by Network
Associates. A number of expenses, such as research and development expenses,
sales and marketing expenses and general and administrative expenses, have been
allocated based on Network Associates' management's estimate of the cost of
services provided by them. These allocations were generally based on either a
direct cost pass-through or percentage of total expenses for the services
provided, based on headcount. See Note 4 of notes to financial statements. In
light of the above, you should not consider our historical financial statements
to be representative of future results.
We are a leading provider of hosted, version-less PC security and
management software over the Internet. We derive our revenue from:
- products, software and subscription licenses sold through the McAfee
Store as well as through e-retail distributors, such as Beyond.com and
America Online, and computer original equipment manufacturers, or OEMs,
such as Gateway and Dell. The McAfee Store is the location on our web
site where consumers can purchase McAfee-branded products through secure,
credit-card based transactions;
- software subscriptions for our hosted PC security and management
applications provided on our web site, including McAfee Clinic and Oil
Change;
- sponsorship arrangements in which we provide access to other vendors' web
sites;
- co-hosting arrangements where products and services are branded under
both our brand and that of our partners; and
- banner advertising and other advertising space on our web site sold by us
or our partners to third parties.
Historically, substantially all of our net revenue has come from software
licenses sold through the McAfee Store, OEMs and other e-retail distributors. In
particular, sales of our anti-virus products accounted for approximately 47%,
95%, 91% and 62% of our revenue in 1996, 1997, 1998 and the six months ended
June 30, 1999.
26
<PAGE> 28
In September 1998, Network Associates acquired CyberMedia, Inc., a provider
of desktop utility software solutions. Our net revenue from that date includes
e-commerce revenue relating to CyberMedia products, resulting in a reduced
dependence on anti-virus products.
Our current strategy is to further expand on our historical revenue base
and significantly broaden our role as an Applications Service Provider, or ASP,
providing consumers with access to PC security and management software
applications hosted on our services. Under this ASP model, consumers "rent
versus buy" our software applications. In October 1998, we introduced Oil
Change, our initial hosted subscription service, based on technology acquired
through Network Associates' purchase of CyberMedia. In April 1999, we introduced
McAfee Clinic. McAfee Clinic incorporates the functionality of Oil Change and
provides a significantly broader suite of hosted PC security and management
applications. To date, we have recognized limited revenues from our hosted
applications and services and only began charging for McAfee Clinic on September
2, 1999. We are seeking to convert our current and any future Oil Change
subscribers to McAfee Clinic subscribers. Also, to further expand our revenue
base, we have recently introduced contextual e-commerce services on our web site
and plan to introduce contextual advertising services. Contextual e-commerce
consists of providing purchase recommendations based on a user's PC
configuration, attached peripherals and resident software. Depending on the
purchased product, if the user purchases recommended products from parties with
whom we have a contractual relationship, we receive a referral fee or share in
related product revenue. Contextual advertising will consist of sales of
targeted advertising directed at consumers based on their individual PC
configurations, attached peripherals and resident software.
REVENUE RECOGNITION
Revenue recognition varies depending on the product or service sold.
Revenue derived from the sale of software products is recognized in accordance
with Statement of Position 97-2, or SOP 97-2, "Software Revenue Recognition," as
amended by Statements of Position 98-4 and 98-9, collectively, SOP 97-2, and
Statement of Financial Accounting Standards 48, or SFAS 48, "Revenue Recognition
When Right of Return Exists." Based on these accounting pronouncements, our
revenue recognition practices relating to various products and customers are as
follows:
- Recognition of net revenue at the time of delivery from the sale of
software products sold through both the McAfee Store and our e-retail
distributors, such as Beyond.com and America Online, and sales to OEMs,
varies depending on the product being sold. For products that include
future upgrades, updates or services, such as VirusScan licenses, a
percentage of the revenue is deferred and recognized ratably over the
period for which these upgrades, updates or services are provided,
usually one year. The amount deferred is based on the price of these
upgrades, updates and future services when sold separately. For the
majority of our products, however, we do not sell these upgrades, updates
and services separately and therefore we typically defer a substantial
portion of total revenue and recognize it ratably over one year. Products
sold through our e-retail distributors are sold by us to them at a
discount from list price and additionally, some of our e-retail
distributors may purchase product for inventory. We recognize revenue for
these products when they are sold to the end user.
- Revenue from the fees received for providing sponsorships, co-hosting
arrangements and software subscriptions for our hosted applications is
deferred at the time of the transaction and is recognized ratably over
the term of the arrangement or the subscription term.
- Revenue from banner advertising and other advertising space on our web
site is typically recognized as advertisement impressions are delivered.
27
<PAGE> 29
COSTS AND EXPENSES
Cost of Net Revenue. Cost of net revenue consists of product costs,
technology costs and license fees.
Product costs consist mainly of the cost of media, manuals and packaging as
well as shipping costs for boxed products sold both through our McAfee Store and
through e-retail partners. From September 1998 through May 16, 1999, product
costs also included charges from Beyond.com for processing and fulfilling sales
transactions, including credit card processing fees and fulfillment costs.
Technology costs are included in cost of net revenue because these costs
represent the cost of selling our products and services over the Internet.
Technology costs consist of Internet connection charges, co-location costs for
maintaining server sites, salary and benefit expenses for personnel maintaining
our web site and that of Network Associates, depreciation of equipment such as
routers and access servers, and other related costs associated with the
maintenance of the web sites. We have agreed to maintain Network Associates' web
site. For this service, we charge Network Associates a fee equal to 10% of our
total technologies cost plus a 10% mark-up. Amounts owed to us by Network
Associates are offset against amounts that we owe to Network Associates under
our other agreements with it.
License fees are incurred under the technology cross license agreement with
Network Associates, which gives us the right to sell single-user consumer
licenses for the licensed Network Associates products over the web and through
computer OEMs and e-retailers. The license fee is payable commencing January 1,
1999 and is based on a percentage of net revenue derived from product sales that
include the licensed technology. The license fee was 20% commencing on January
1, 1999, declining 1.625% per quarter until the rate is 7% in the quarter
beginning January 1, 2001 and will remain at 7% thereafter. The rate for the
quarter ended September 30, 1999 is 16.75%. See "Related Party
Transaction -- Intercompany Agreements" for a more detailed description of the
Network Associates cross license. For a quarterly royalty of $250,000, Network
Associates has, among other things, a limited right to sell licenses to any
software products that we create based on the Network Associates technology that
we license from it. This royalty received from Network Associates is offset
against our royalty payments to Network Associates, which are presented on a net
basis in our results of operations.
We expect that cost of net revenue will continue to increase in absolute
dollars but may fluctuate as a percentage of net revenue over time as we expand
our operations.
Research and Development. Research and development expenses consist
primarily of salary and benefits for our development and technical staff,
computer and equipment depreciation, as well as allocated overhead expenses.
Prior to 1999, we did not engage in research and development activities or incur
related expenses independent from Network Associates. Research and development
expenses during that time represent an allocation of expenses incurred by
Network Associates in developing the McAfee.com web site.
We are focusing our research and development resources on providing
next-generation software services for Internet access devices initially focused
on PC security and management delivered via the Internet, contextual e-commerce
and contextual advertising. We expect that our research and development expenses
will grow in absolute dollars as we continue to invest in development and
enhancement of our products and services, but may fluctuate as a percentage of
net revenue. We also expect an increase in research and development expenses
related to the anticipated future international expansion of our business. The
timing and amount of our research and development expenses may vary
significantly based upon the number of new products and significant upgrades
under development and products acquired, if any, during a given period.
Marketing and Sales. Marketing and sales expenses consist primarily of
salary, commissions and benefits for marketing and sales employees as well as
expenses associated with advertising and
28
<PAGE> 30
promotions. Also included in marketing and sales expenses is a charge from
Network Associates for providing retail support and customer care. We expect
marketing and sales expenses to increase in absolute dollars over time as we:
- continue to aggressively market our products and services;
- attempt to establish strategic relationships with third parties; and
- expand internationally.
However, we expect that our marketing and sales expenses may fluctuate as a
percentage of net revenue. See "Related Party Transactions -- Intercompany
Agreements" for a more detailed description of the Network Associates corporate
services agreement.
General and Administrative. General and administrative expenses consist
principally of charges under the corporate services agreement with Network
Associates and of salary and benefit expenses for administrative personnel.
Under the corporate services agreement, Network Associates is providing services
relating to tax, accounting, insurance, employee benefits administration,
corporate record-keeping, payroll, information technology infrastructure, and
facilities management. The expenses are allocated based on relative headcount
and include a 10% mark-up from Network Associates' allocated expenses. In turn,
we allocate a portion of these charges related to facilities and information
technology infrastructure to marketing and sales and research and development.
This allocation is based on the headcount of these departments. Although we
believe that we benefit from the services provided by Network Associates, the
corporate services agreement gives us the right to obtain these services from a
third party, and we may do so to the extent that we are able to obtain these
services on more economical terms. We expect that general and administrative
expenses will increase in absolute dollars in the future, but may fluctuate as a
percentage of net revenue, as we expand our operations.
Stock-Based Compensation. In January 1999, five officers of Network
Associates were granted options to purchase 3,420,000 shares of our Class A
common stock. These options originally vested over four years. Since these
officers are not our employees, those options are accounted for as variable
options. The determination of the total compensation to be recognized in
connection with these grants requires the remeasurement of the fair value of the
options each reporting period until the options are fully vested. Compensation
expense is reflected in our results of operations over the vesting period. We
recorded compensation expense of approximately $1.2 million and $1.6 million for
the three and six months ended June 30, 1999. On September 22, 1999, with the
agreement of the optionholders, we cancelled options for 1,710,000 shares and
amended the remaining options to make them fully vested. As a result of this
change, together with a charge for options granted to Network Associates
employees in September 1999, we will record a charge of approximately $6.4
million during the third quarter of 1999.
Taxes. Our operations are included in Network Associates' consolidated U.S.
tax returns. No income tax provision has been included in our financial
statements because net losses were incurred throughout the reporting period. We
have entered into a tax sharing agreement with Network Associates effective upon
the consummation of this offering. See "Related Party Transactions --
Intercompany Agreements" for a more detailed description of the Network
Associates tax sharing agreement.
29
<PAGE> 31
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
net revenue represented by certain items in our Statement of Operations.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------ -----------------
1996 1997 1998 1998 1999
------ ----- ----- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
------ ----- ----- ----- ------
Cost of net revenue:
Product.................................... 9.9 5.6 11.6 2.1 19.1
Technology costs........................... 38.2 77.5 47.3 49.6 35.9
License fees............................... -- -- -- -- 11.8
------ ----- ----- ----- ------
Total cost of net revenue............... 48.1 83.1 58.9 51.7 66.8
------ ----- ----- ----- ------
Operating expenses:
Research and development................... 53.2 12.9 42.3 25.3 29.0
Marketing and sales........................ 266.8 58.1 18.3 1.5 79.9
General and administrative................. 64.0 5.6 12.2 13.2 21.2
Stock-based compensation................... -- -- -- -- 17.4
------ ----- ----- ----- ------
Total operating expenses................ 384.0 76.5 72.8 39.9 147.4
------ ----- ----- ----- ------
Income (loss) from operations................ (332.1) (59.6) (31.7) 8.4 (114.3)
------ ----- ----- ----- ------
Net income (loss)............................ (332.1)% (59.6)% (31.7)% 8.4% (114.3)%
====== ===== ===== ===== ======
</TABLE>
COMPARISON OF THE SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND JUNE 30, 1999
Net Revenue. Net revenue increased from $2.6 million in the six months
ended June 30, 1998 to $9.3 million in the six months ended June 30, 1999. Net
revenue increased primarily as a result of increased traffic to our McAfee Store
in connection with the emergence of a number of new harmful computer viruses in
the first half of 1999 and the official launch of our web site in the second
quarter of 1999. The increase in net revenue also reflects sales of software
product licenses and subscriptions related to products acquired through Network
Associates' acquisition of CyberMedia in September 1998, which products were not
previously marketed as an online service.
Cost of Net Revenue. Cost of net revenue increased from $1.3 million in the
six months ended June 30, 1998 to $6.2 million in the six months ended June 30,
1999. The increase was primarily related to the increase in the cost of products
sold through the McAfee Store as sales volumes increased, an increase in
technology costs relating to the substantial investment in our infrastructure,
as well as license fees payable to Network Associates beginning January 1, 1999.
The increase in the total cost of net revenue as a percentage of net revenue
reflects costs incurred for fulfillment services provided by Beyond.com and
license fees payable to Network Associates. Effective May 17, 1999, the
arrangement with Beyond.com was restructured, such that Beyond.com became a
reseller rather than a fulfillment agency.
Research and Development. Research and development expenses increased from
$653,000 in the six months ended June 30, 1998 to $2.7 million in the six months
ended June 30, 1999. This increase was primarily due to a significant increase
in investment in research and development headcount and infrastructure in 1999
as we continued to expand and enhance our product and service offerings. As a
percentage of net revenue, research and development expenses were 25% in the six
months ended June 30, 1998 and 29% in the six months ended June 30, 1999.
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Marketing and Sales. Marketing and sales expenses increased from $38,000 in
the six months ended June 30, 1998 to $7.5 million in the six months ended June
30, 1999. This increase was primarily due to a significant investment in the
marketing of our products and services, including advertising and promotions, as
well as development of strategic relationships with a variety of Internet
companies. In June 1999, we began a significant advertising campaign to build
brand awareness, and also increased the number of sales and marketing personnel.
Also, beginning January 1, 1999, we incurred charges from Network Associates for
retail support and customer care of approximately $1.1 million per quarter.
These amounts were not material in prior years. As a percentage of net revenue,
marketing and sales expenses were 2% in the six months ended June 30, 1998 and
80% in the six months ended June 30, 1999.
General and Administrative. General and administrative expenses increased
from $341,000 in the six months ended June 30, 1998 to $2.0 million in the six
months ended June 30, 1998. This increase was primarily due to the increase in
charges from Network Associates, resulting from our additional headcount due to
the expansion of our operations.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Net Revenue. Net revenue increased from $539,000 in the year ended December
31, 1996 to $2.5 million in the year ended December 31, 1997 and to $6.3 million
in the year ended December 31, 1998. These increases in net revenue were
primarily due to increases in the licensing of anti-virus software products to
new customers.
Cost of Net Revenue. Cost of net revenue increased from $259,000 in the
year ended December 31, 1996 to $2.1 million in the year ended December 31, 1997
and to $3.7 million in the year ended December 31, 1998. The increases in cost
of net revenue were primarily due to increased product sales from year to year,
as well as an increase in technology costs resulting from an increase in
spending on infrastructure, particularly in the second half of 1998 as we
prepared to launch our pilot web site in December 1998.
Research and Development. Research and development expenses increased from
$287,000 in the year ended December 31, 1996 to $326,000 in the year ended
December 31, 1997 and increased to $2.7 million in the year ended December 31,
1998. These increases were primarily due to a significant investment in research
and development headcount and infrastructure in 1998 as we expanded our
operations. As a percentage of net revenue, research and development expenses
were 53% in 1996, 13% in 1997 and 42% in 1998.
Marketing and Sales. Marketing and sales expenses increased from $1.4
million in the year ended December 31, 1996 to $1.5 million in the year ended
December 31, 1997 and decreased to $1.2 million in the year ended December 31,
1998. The decrease from 1997 to 1998 was primarily due to a decrease in
marketing and the significant reduction in marketing and sales headcount. As a
percentage of net revenue, marketing and sales expenses were 267% in 1996, 58%
in 1997 and 18% in 1998.
General and Administrative. General and administrative expenses decreased
from $345,000 in 1996 to $141,000 in 1997 and increased to $767,000 in 1998. The
decrease from 1996 to 1997 was primarily due to a decrease in our headcount
resulting in a lower charge from Network Associates. The increase from 1997 to
1998 was primarily due to an increase in the charge from Network Associates as a
result of a significant increase in headcount resulting from our increased
investment in infrastructure and expansion of operations. As a percentage of net
revenue, general and administrative expenses were 64% in 1996, 6% in 1997 and
12% in 1998.
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QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly statement of
operations data for each of the six most recent quarters. In our opinion, this
information has been prepared on the same basis as the audited financial
statements contained in this prospectus and includes all adjustments, consisting
only of normal recurring adjustments, we consider necessary for fair
presentation in accordance with generally accepted accounting principles. This
information should be read in conjunction with our financial statements and the
related notes appearing at the end of this prospectus. Our operating results for
any three-month period are not necessarily indicative of results for any future
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------
MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30,
1998 1998 1998 1998 1999 1999
-------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenue....................................... $ 1,096 $ 1,490 $ 1,682 $ 2,024 $ 3,469 $ 5,863
------- ------- ------- ------- ------- -------
Cost of net revenue:
Product costs................................... 5 50 217 458 952 829
Technology costs................................ 572 710 1,151 542 1,226 2,126
License fees.................................... -- -- -- -- 434 667
------- ------- ------- ------- ------- -------
Total cost of net revenue..................... 577 760 1,368 1,000 2,612 3,622
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development........................ 292 361 764 1,244 1,558 1,145
Marketing and sales............................. 17 21 358 756 2,398 5,055
General and administrative...................... 191 150 232 194 350 1,628
Stock-based compensation........................ -- -- -- -- 456 1,170
------- ------- ------- ------- ------- -------
Total operating expenses...................... 500 532 1,354 2,194 4,762 8,998
------- ------- ------- ------- ------- -------
Income (loss) from operations..................... 19 198 (1,040) (1,170) (3,905) (6,757)
------- ------- ------- ------- ------- -------
Net income (loss)................................. $ 19 $ 198 $(1,040) $(1,170) $(3,905) $(6,757)
======= ======= ======= ======= ======= =======
Net income (loss) per share, basic and diluted.... $ .00 $ .01 $ (.03) $ (.03) $ (.11) $ (.19)
Shares used in per share calculation.............. 36,000 36,000 36,000 36,000 36,000 36,000
</TABLE>
We have experienced growth in net revenue in each quarter since January 1,
1996. Net revenue increased significantly in the quarters ended March 31, 1999
and June 30, 1999 largely due to an increase in the licensing of anti-virus
software through the McAfee Store and through e-retail distributors as well as
an increase in our product offerings due to Network Associates' acquisition of
CyberMedia in the quarter ended September 30, 1998.
Cost of net revenue has increased in each quarter except the quarter ended
December 31, 1998 with substantial increases in the quarters ended March 31,
1999 and June 30, 1999. The increases were primarily due to an increase in
product costs resulting from an increase in net revenue, and increased costs due
to the significant technology infrastructure investment, as well as license fees
paid to Network Associates under our cross license agreement commencing January
1, 1999. The decrease from the quarter ended September 30, 1998 to December 31,
1998 was due to the consolidation of duplicate technology infrastructure and the
renegotiation of vendor contracts.
Operating expenses have also increased in each quarter with substantial
increases in the quarters ended March 31, 1999 and June 30, 1999. These
increases were primarily due to increased investment in our research and
development efforts and a significant increase in marketing and sales due to
significant spending on advertising and promotions, as well as development of
strategic relationships with several Internet companies.
Our net revenue and results of operations could fluctuate significantly
quarter-to-quarter and year-to-year. Causes of such fluctuations may include the
conversion of our web site users into paying
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subscribers and the rate at which they renew their subscriptions, seasonal
purchasing patterns on the Internet, the number of users of our web site
purchasing products offered through our web site and the mix of products
purchased, the amount and timing of our operating expenses and capital
expenditures, the percentage of revenue which is deferred, and costs related to
potential acquisitions.
Significant quarterly fluctuations in net revenue will cause significant
fluctuations in our cash flows and the cash and cash equivalents, accounts
receivable and deferred net revenue accounts on our balance sheet.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We do not currently hold any derivative instruments and do not engage in
hedging activities. Also, we do not currently hold any variable interest rate
debt or lines of credit, and currently do not enter into any transaction
denominated in a foreign currency. Although our revolving loan agreement with
Network Associates provides for interest based on the one-month LIBOR rate,
there are currently no outstanding borrowings under that agreement. Thus, our
current exposure to interest rate and foreign exchange fluctuations is minimal.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, we had limited cash resources, with $10 million due from
Network Associates related to net cash generated by our operations during the
period from January 1, 1996 through June 30, 1999. Under our asset contribution
and receivables settlement agreement, Network Associates will settle the
then-outstanding amount, without interest, in cash on September 30, 1999. Any
subsequent receivable or payable will be settled in cash on a quarterly basis.
At June 30, 1999, we also had in place an intercompany revolving loan agreement
under which Network Associates has agreed to make up to $30 million available to
us. The interest rate under this revolving loan is equal to the one-month LIBOR
rate. Beginning 30 days after the completion of this offering, Network
Associates may elect to require us to repay all outstanding principal and
interest under the agreement. If Network Associates does not require repayment
prior to that time, the revolving loan will be repayable in full on January 1,
2001, the termination date of the agreement. As of August 31, 1999, there were
no amounts outstanding under the revolving loan agreement.
Net cash used in operating activities was $674,000 in the year ended
December 31, 1996, consisting primarily of net loss before depreciation,
partially offset by an increase in deferred net revenue.
Net cash provided by operating activities was $399,000 in the year ended
December 31, 1997 and $1.5 million in the year ended December 31, 1998,
consisting primarily of increases in deferred net revenue partially offset by
net loss before depreciation.
Net cash provided by operating activities was $1.2 million in the six
months ended June 30, 1998, consisting primarily of an increase in deferred net
revenue. Net cash provided by operating activities was $8.8 million in the six
months ended June 30, 1999, consisting primarily of increases in deferred net
revenue and accounts payable and accrued liabilities partially offset by net
loss before depreciation.
Net cash (used in) provided by financing activities consists principally of
the change in the amount receivable (from) to Network Associates.
We believe that cash due from Network Associates, the net proceeds from
this offering and anticipated cash flow from operations will be sufficient to
fund our working capital and capital expenditure requirements for at least the
next 12 months. However, we may seek to raise additional capital during that
period. We cannot assure you that we will not require additional funds during
the next 12 months. Even if these additional funds are not required, we may
decide to seek additional equity or debt financing. There can be no assurance
that such financing will be available on acceptable terms, if at all, or that
such financing will not be dilutive to our stockholders.
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YEAR 2000 ISSUES
Many currently installed computer systems and software products are coded
to accept, store, or report only two digit entries in date code fields.
Beginning in the Year 2000, these date code fields will need to be enabled to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies, including us and our vendors,
will need to be upgraded to comply with these Year 2000 requirements. We could
be impacted by Year 2000 issues occurring in our own infrastructure or the
infrastructure of our suppliers, vendors and financial service organizations.
These Year 2000 issues could include information errors and significant
information system failures. Any disruption in our operations as a result of
Year 2000 issues could have a material adverse effect on our business, results
of operations and financial conditions.
OUR STATE OF READINESS
Overview. To address Year 2000 readiness, we have, as part of the
intercompany service agreements, contracted with Network Associates to provide a
corporate program to coordinate efforts across all business functions and
geographic areas, including addressing risks associated with business partners
and other third-party relationships. The agreed upon Year 2000 readiness program
is divided into four program areas: Commercial Product Compliance; Internal
Systems and Technology Compliance; Supplier and Business Partner Compliance; and
Facilities and Safety Compliance. For each of these areas, the program specifies
a four-step approach that includes: Awareness (ownership and task assignment);
Inventory (listing of all items to be assessed); Assessment (prioritizing
inventoried items, assessing compliance, planning corrective actions, making
initial contingency plans); and Corrective Action (implementing corrective
actions, verifying implementation, and finalizing contingency plans). Network
Associates has substantially completed the assessment phase for all four areas
and is targeting completion of corrective actions by the end of the third
quarter of 1999. However, there can be no assurance that Network Associates will
be able to complete all four phases in a timely manner, if at all, or that the
process will adequately address Year 2000 issues.
Commercial Product Compliance. Our currently licensed products, are
designed to be "Year 2000 Compliant," meaning that our licensed products are
expected to continue to operate substantially in accordance with published
documentation on and after January 1, 2000. Network Associates uses the British
Standards Institute's DISC PD-2000 as the standard for assessing Year 2000
compliance. Network Associates has evaluated and tested all our licensed
products for Year 2000 compliance and believes that all products released since
November 1998 or currently under development are Year 2000 compliant.
Internal Systems and Technology Compliance. As part of the intercompany
services agreement, we rely on Network Associates for our core IT systems, with
the exception of our web IT infrastructure. Network Associates has implemented
the R3 system from SAP. The SAP system is designed to automate more fully our
business processes and is certified by SAP as Year 2000 compliant. This
implementation was completed in late 1997 and early 1998 and included most of
the major functional areas of our business. Our core web IT infrastructure is
substantially Microsoft-based and we have received certificates of Year 2000
compliance from Microsoft. We have also obtained compliance certificates from
all other significant third party software vendors. Our hardware infrastructure
is based on Compaq, Cisco and HP systems that are less than two years old and
which have also been certified to be Year 2000 compliant.
Our other information technology systems include telephone switches and
equipment and software, network, desktop and server hardware and related
operating systems and application software and electronic data interchange
systems. Network Associates has substantially completed an assessment of our
systems and we have replaced, upgraded, or planned to replace or upgrade, those
systems that were
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not Year 2000 compliant. We believe that all system compliance projects will be
substantially completed by the end of the third quarter of 1999.
Supplier and Business Partner Compliance. Our suppliers and business
partners include the sources of the equipment and supplies we use in the conduct
of our business, as well as our financial institutions, and other service
providers. All our vendors were assessed in terms of level of importance to our
continuing business. The purpose of this assessment was to determine which
vendors would have a significant negative impact on us should they fail to
operate without interruption through January 1, 2000. Each highly critical
vendor was asked to sign a statement of Year 2000 business readiness, and we
have developed contingency plans to replace or supplement these vendors and all
other important vendors in the event their products are not Year 2000 compliant.
Facilities and Safety Compliance. Our facilities and safety technology
systems include building systems such as heating, cooling, and air purification,
fire and sprinkler systems, security systems and elevators. Our commitment is to
minimize the business risks attributable to Year 2000 problems in these systems.
Network Associates has actively worked with each facilities and safety systems
vendor to identify and resolve any Year 2000 compliance issues and contingency
plans have been formulated for all critical sites, regardless of whether they
have been shown to be compliant or not. Included in these contingency plans are
backup web sites as well as backup organizations (such as call centers). We have
substantially completed the repair or replacement of non-compliant items that
affect our product development, distribution and support operations.
THE COSTS TO ADDRESS OUR YEAR 2000 ISSUES
Historic or period expenses incurred in connection with the resolution of
Year 2000 issues to date have consisted principally of internal labor expenses
of compliance planning and assessment. To date, these expenses have not been
significant. During the remainder of 1999, we expect to incur an immaterial
amount of compliance-related expenditures. We do not expect expenditures in
future years related to Year 2000 compliance to be significant.
THE RISKS OF OUR YEAR 2000 ISSUES
Our expectations as to our efforts to ensure and achieve Year 2000
compliance are forward-looking statements. Actual results may vary materially as
a result of a number of risks and uncertainties, including the following:
- Network Associates may not successfully complete our Year 2000
contingency program.
- We may be unable to successfully and timely modify non-Year 2000
compliant products, services and systems.
- Our contingency plans may not address all Year 2000 risks that may
actually arise.
- Our contingency plans will only be effective if timely and properly
implemented.
- We do not have, and do not anticipate obtaining, any insurance policy
providing material coverage for potential injuries or damages related to
or caused by Year 2000 issues.
- Actual expenses of our Year 2000 compliance efforts may exceed our
estimates.
Network Associates has initiated communications with third party suppliers
of the major computers, software, and other equipment used, operated, or
maintained by us to identify and, to the extent possible, to resolve issues
involving the Year 2000 problem. Neither Network Associates nor we control the
actions of these third party suppliers. These suppliers may fail to resolve any
or all Year 2000 problems with their respective systems before the occurrence of
a material disruption to our business or any of their other customers' business.
Also, the computer systems necessary to maintain the viability of the Internet
or any of the Web sites that direct customers to our online store may not be
Year 2000 compliant.
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Computers used by customers to access our online store may not be Year 2000
compliant, delaying customers' product purchases. Any of the above risks could
have a material adverse effect on our business, results of operations and
financial condition.
If the purchasing patterns of our current or potential customers are
significantly affected by Year 2000 concerns, we could experience a significant
reduction in our net revenue and related growth.
Lastly, it has been widely predicted that there will be a significant
amount of litigation surrounding Year 2000 issues. It is uncertain whether, or
to what extent, we may be affected by such litigation. Because our products are
able to operate in the Year 2000 and beyond, we do not anticipate exposure to
material product defect or similar litigation. Any such litigation, however,
could have a material adverse effect on our business, results of operations and
financial condition. We also may not receive any assistance, damages or other
relief as a result of our initiation of any litigation related to the Year 2000
issue. Our inability to implement our Year 2000 plans or to otherwise address
Year 2000 issues in a timely manner could have directly or indirectly a material
adverse effect on our business, results of operations and financial condition.
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BUSINESS
OVERVIEW
We are a leading provider of PC management solutions for consumers. Through
our web site at www.McAfee.com, we allow consumers to secure, repair, update and
upgrade their PCs. We are among the first consumer Applications Service
Providers, hosting software applications on our own servers and providing
applications services online. Our applications allow our subscribers to manage
their PCs by checking for and eliminating viruses, optimizing PC and peripheral
performance, repairing problems, updating outdated software and determining Y2K
compliance. We also offer relevant content and contextual e-commerce services
that enable users to maximize their PC investment. We recently began charging
for our McAfee Clinic service in September 1999. To date, over six million users
have registered on our web site from over 230 countries, and we have over
900,000 trial subscribers.
INDUSTRY BACKGROUND
GROWTH OF ONLINE COMPUTING OUTSIDE OF THE OFFICE
Historically, consumers used personal computers, or PCs, at home for
stand-alone functions such as word processing, game playing and home financial
management. Today, however, consumers are increasingly motivated to purchase PCs
to access the Internet and use e-mail from home. According to Jupiter
Communications, approximately 63 million U.S. households will be online by the
year 2002, representing 59% of all U.S. households. The growth in households
online represents one of the fastest-growing segments of Internet use.
International Data Corporation, or IDC, estimates that the number of overall
Internet users worldwide will grow from approximately 69 million in 1997 to
approximately 502 million in 2003. Tremendous consumer demand for Internet
access, combined with faster Internet connectivity and the emergence of PCs
priced below $1,000, has fueled growth in consumer PC ownership. IDC estimates
that there are currently approximately 71 million PCs in use by U.S. households.
In addition to PCs, a number of other consumer focused Internet access devices
such as pagers, handheld devices and wireless Internet-enabled phones are
quickly emerging. IDC estimates that there were 5.8 million smart handheld
devices in use in 1999. IDC projects that by the year 2003, there will be nearly
19 million smart handheld devices shipped, and by this time, these devices will
be outselling PCs.
Increasing use of the Internet has transformed the home PC from merely a
stand-alone processor into the primary Internet access device for consumers
engaged in information retrieval, communication and e-commerce. Internet
applications that are now popular with consumers include world wide web access,
e-mail, online bill payment, personal financial management, online shopping and
trading, calendar scheduling, and contact management. The proliferation of these
applications has motivated consumers to increasingly depend on their PCs to
reliably access, store and manage a growing amount of valuable and highly
sensitive data. Many of these applications have become essential to users, and
any PC-related failure could lead to hours of lost time and significant
financial loss. The combination of greater access to networks such as the
Internet and increasingly sophisticated applications has made both PCs and PC
management more complex. Moreover, as the number of PCs in use increases and
price points decline, the number of first-time buyers, who are often less
technologically sophisticated than prior generations of users, is increasing.
CURRENT MANAGEMENT OF PCS AND NETWORKS
As the commercial value of activities conducted on the Internet and other
computer networks grows exponentially, it becomes increasingly important to
manage and protect these networks, the PCs in the networks and the data residing
on them. Fully-staffed corporate IT departments are charged with numerous
mission-critical tasks that keep their systems fully operational and secure.
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Consumers, in contrast, are left on their own to manage and protect their
PCs. They generally lack the knowledge and sophistication necessary to properly
secure and manage their PCs and may be overwhelmed by the variety and complexity
of the products and services that are marketed to help them perform these tasks.
PC users are responsible for numerous decisions and tasks regarding the
maintenance and health of their PCs, which include:
Virus Protection. Computer viruses are typically spread via e-mail and file
downloads over Internet-connected PCs. To date, there are over 45,000 known
computer viruses worldwide, with numerous new and altered viruses discovered
daily. Recent computer virus outbreaks such as Melissa, Chernobyl and
Explorer.zip represent a new class of virus that uses the Internet to infect
hundreds of thousands of computers in a matter of hours. We believe that new and
modified strains of computer viruses will continue to be developed, requiring
rapid responses and continual updates of existing anti-virus protections. As a
growing proportion of PCs are connected to the Internet and other networks,
vulnerability to virus infection increases dramatically. Consumers are
especially susceptible to computer viruses because they have little protection
other than what they purchase themselves.
Internet Security. The rapid growth and high dollar volume of e-commerce,
forecasted by IDC to reach $1.3 trillion worldwide for 2003, and corresponding
valuable data traffic makes network break-ins potentially more lucrative for
hackers and more damaging for consumers. The storage of vital information on
PCs, such as confidential files, credit card information and financial data,
increases the magnitude of possible damage from network intruders. New methods
of intrusion, such as penetrating security loopholes in popular Internet
browsers, allow remote hackers to take control of a consumer's PC and steal,
alter or delete files, confidential documents, and applications without their
knowledge. The "always on" availability of Internet access services such as
cable modem and digital subscriber line, or DSL, services increases the time
during which home PCs are vulnerable to attacks. In general, consumers do not
have the adequate tools to protect their PCs against intrusion.
PC Management. Business PC users generally receive support from corporate
IT departments in diagnosing and configuring computers to their optimal
settings. This high level of technical support within the organization helps
business users focus on being productive instead of trying to make their PCs
work. Consumers, on the other hand, must resort to reading complex technical
documentation, visiting online newsgroups or calling the PC or operating system
vendor for technical support. The consumer's burden is further complicated by
increasingly frequent releases of software upgrades, updates, fixes and patches.
Software Management. Corporate IT departments and consumers both face a
variety of software management issues. In the corporate environment, the
distribution of software version updates occurs regularly as large corporate
customers are notified of major version changes and releases by software
vendors. Enterprise-wide software programs exist to remove unnecessary programs
and files to optimize the efficiency of file and data management. A number of
companies have focused on the problem of ready access to version updates of
software for corporate customers. Home PC users, however, often are left to
determine on their own, often with incomplete information, their need for and
the availability of version upgrades of their software programs. Compounding the
problem, new software releases frequently contain "bugs" that may limit the
functionality or security of the software. In general, software patches and
corrections are effectively disseminated to large corporate customers, but often
are not communicated directly to home PC users.
Year 2000 Compliance. Date-sensitive computer systems and programs may fail
to recognize or correctly process the year 2000 as the century date change
approaches or occurs. While corporations are highly focused on the impact of the
year 2000, or Y2K, problem, and have spent significant resources to address this
problem, consumers generally do not know whether the Y2K problem will affect
their home PC, or whom to trust for help in diagnosing and fixing potential Y2K
problems on their home PC.
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Computer-Related Purchases. Corporate hardware and software purchasing
decisions are made by trained IT staffs with expertise in their company's
technology needs and knowledge of the full array of available computing
solutions. Resellers offer corporate buyers assistance in technical education
and documentation, system interoperability, price-to-performance tradeoffs, and
system roadmaps for upgrades and purchases of both hardware and software.
Consumers, on the other hand, are solely responsible for decision making
regarding their home computing needs.
While corporate IT departments monitor and guard against these PC security
and management problems, home PC users often do not realize that they have a
computer problem until it is too late. Trouble may, for example, come
unexpectedly in the form of a virus-infected e-mail or download from the
Internet. Once affected, consumers may not know or understand the nature or
severity of the problem or know how to find a solution. Consumers have typically
sought assistance through retail stores, customer support lines provided by PC
and software vendors or their own research in computing magazines.
Problems with support through retail computer stores include the following:
- Stores are often distant, crowded, and understaffed, and their staff may
be insufficiently knowledgeable about the consumer's problem or possible
solutions.
- If retail assistance is found, consumers must choose from a wide variety
of available products, may not be able to appropriately articulate their
exact PC problem or may not be presented the best solution because the
retailer has failed to stock the most appropriate item.
- Potential retail product solutions may take the form of several products
that must be used together to have the greatest impact, and the ordinary
consumer or store employee may not fully understand how best to combine
these products.
- Software in the retail channel, such as virus protection, is often
out-of-date by the time it reaches the shelves; for example, new viruses
may have already emerged in the time it takes the anti-virus software to
be developed, burned onto CDs, placed in shrink-wrapped packaging and
shipped to the store, making the virus protection obsolete.
Consumers relying on the limited customer support by software vendors or PC
manufacturers also face problems. First, they must determine the appropriate
party to call. Once they locate the appropriate call center, they often find it
to be inadequate and are frustrated by long hold times on the phone,
understaffed customer support personnel and unhelpful help desks.
As PCs and related software applications have become more complex, vendors
have been providing less customer support to compensate for product price
declines, and as the Internet has increased the vulnerability of PCs, consumers
have found themselves without an adequate PC security and management solution.
THE MCAFEE.COM SOLUTION
McAfee.com is the place for your PC on the Internet. McAfee.com allows
consumers to secure, manage, update and upgrade their PCs online. We believe
that consumers first come to our web site either to protect their PC as a
precautionary matter or for emergency assistance fixing their PC when faced with
a serious problem. Our web site offers the following critical PC security and
management solutions:
Virus Protection. Our online anti-virus service scans and cleans PCs
quickly and efficiently and can recover and repair damaged computer files that
have become infected with a virus. This service provides consumers with the
latest virus protection and can be accessed at any time from any PC. Users can
detect and clean viruses on their computers by using their browsers to access
our web site.
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Internet Security. We provide consumer PC users with tools to protect their
privacy and security while on the Internet. For example, our GuardDog software
monitors programs and applets for suspicious behavior, protects sensitive
information, such as e-mails, passwords and personal files, and performs a
complete security audit on the PC user's system.
Software Management. We assist consumers in locating and downloading new
version releases, upgrades, plug-ins, patches and fixes for software
applications and the Windows operating system that they use on their home PCs.
PC Management. We provide consumers an online service that allows them to
optimize their PCs online. This online service, among other things, provides
consumers the ability to remove and clean unnecessary files from their hard
drives, defragment their hard drives (i.e., reorganize the data on their hard
drives to make data more rapidly accessible) and display a visual read-out of
their system configuration.
Year 2000 Compliance. We provide a comprehensive online Year 2000 scan
service for consumers to check their home PCs for Y2K compliance. This online
service checks the PC hardware, software applications and application data files
for Y2K compliance. If Y2K problems are identified, our solutions are designed
to guide users to services to remedy the situation. This service also provides a
comprehensive list of Y2K web sites for major software, hardware and peripheral
manufacturers.
Computer-Related Purchases. We provide educational and informational
services to assist the consumer in making purchases of computer hardware,
software, peripherals and other accessories. We provide a highly contextual
service that recommends books and related software based on the user's PC
configuration, attached peripherals and resident software. We also provide an
online comparative shopping service that allows consumers to find the best deals
on equipment, peripherals and accessories based on user-selected configuration
and price points.
Consumers who visit our web site for these security and management
solutions can learn about other PC problems and related products and services
that we offer. Our web site contains a number of centers which provide
diagnostic services, PC-related products and other services for home PC users.
For example, a PC user who comes to our site with a particular anti-virus
problem may then decide to check for Y2K issues or clean up the PC's hard drive.
We believe that our broad product and service offerings provide consumers
the following benefits:
One-Stop, Integrated Solution. McAfee.com is a one-stop destination for
consumer PC security and management needs. Our web site provides a suite of
online products and services personalized for the user based on the user's PC
configuration, attached peripherals and resident software. Our integrated
solution allows consumers to secure, repair, update and upgrade their PCs by
visiting our McAfee Clinic, Anti-Virus Center, PC Checkup Center, Y2K Center,
Shopping Center, Download Center and Support Center.
Ease of Use. Our web site is designed to be easy to use and helpful for PC
users of all skill levels, from novice to expert. With limited user involvement,
we can diagnose a PC over the Internet for potential security and management
problems and provide an online, personalized solution to a PC user's problem
with the ease of a mouse click. We offer a user-friendly Internet browser
interface and constantly seek to improve this interface to make it easier for
consumers to navigate and use our web site.
Information and Education. We provide a wealth of PC-related information
and educational materials for access and use by consumers on our web site. We
offer, among other services:
- a comprehensive, searchable library of viruses with information about
their characteristics, symptoms and severity;
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- McAfee Dispatch, an electronic newsletter that provides information on
new services, products and viruses; and
- user-specific upgrade recommendations and educational books on computer
hardware, software, peripherals and accessories.
We also offer a virus "early warning" e-mail service. This service rapidly
alerts consumers to new viruses and provides appropriate directions to consumers
to safeguard their PCs. Once a virus is identified, we work with AVERT Labs, a
research division of Network Associates, to rapidly deliver updated virus
detection and cleaning services to our customers.
Applications Hosted on Our Servers Rather than the Consumer's PC. In
addition to selling downloadable versions of software that reside locally on a
customer's PC, we host software applications on our own servers. Our hosted
software applications are designed to run over the Internet at speeds comparable
to those obtained if the application were entirely resident on the user's PC. As
an Applications Service Provider, or ASP, we allow users to "rent versus buy"
software. This allows consumers to realize several unique benefits:
- Our hosted software applications are "version-less" or self-updating, so
consumers running our hosted software service can be assured that they
are using the most recent version.
- Our services do not involve large downloads of large application files
over the Internet, which can take an inordinate amount of
time -- reducing PC storage space requirements and avoiding wait time
from large downloads.
- The overall cost to subscribe to our software service is expected to be
significantly less than if the consumer were to buy software applications
and subsequent new version releases.
THE MCAFEE.COM STRATEGY
Our objective is to become the leading and trusted online destination where
consumers secure, repair, update and upgrade their PCs and other Internet access
devices. The key elements of our strategy include:
Strengthen the McAfee.com Brand. We plan to continue aggressively building
awareness among consumer PC users for the McAfee.com brand name. Our aim is to
enhance McAfee.com's position as a trusted place on the Internet for all the
consumer's PC-related products, services and information. To achieve this
objective, we intend to expand our marketing efforts with advertising campaigns
and other promotional activities and to offer a full suite of trusted products,
services and information to consumers.
Drive Adoption of Applications Service Provider Model. As an ASP, we offer
customers the ability to run applications online and "rent versus buy" those
applications. Prior to September 2, 1999, we offered our online hosted products
and services for free. While we will continue to offer a significant amount of
free services on our web site, some of the more powerful products and services
are now only available to our paid subscribers. To drive adoption of our ASP
model, in addition to offering other free services, we offer 14-day free trial
subscriptions to McAfee Clinic. We are targeting the following groups of McAfee
users for transition to paid online subscriber status:
- our existing base of over 900,000 trial subscribers to McAfee Clinic, who
until recently have used our online services for free;
- our existing base of over 6 million registered McAfee.com users, who have
visited our web site but have yet to subscribe to our online services;
and
- the large number of existing McAfee software users, which we estimate at
over 30 million.
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Attract New Users to Our Web Site. Initially our user base grew by word of
mouth and positive press articles. In July 1999, we launched our first
advertising campaign, using a combination of television, radio and Internet
advertising. We plan to continue these marketing efforts to attract new users to
our web site and increase the adoption of our products and services. We also
will continue to pursue strategic arrangements with content providers, other web
sites, PC manufacturers and other Internet access providers.
Maintain Technology Leadership. We are currently a leading provider of
hosted, version-less PC security and management software delivered over the
Internet. Our products and services and delivery network are designed to apply
our leading edge technology to solve complex PC security and management problems
conveniently. We intend to leverage our technology leadership as a consumer ASP
to create loyal and satisfied customers who will both subscribe to our products
and services and return frequently for repeat purchases. To maintain our
technology leadership, we intend to continuously focus on the ease of use of our
products and services, expand our products and services and upgrade our network.
Expand Our International Presence. We have a global customer base with
registered users from over 230 countries and territories around the world. With
international PC sales and Internet connectivity growing more rapidly than in
the U.S., we plan to focus resources on expanding our current international
presence in Europe, Japan and other countries.
Expand Products and Services Beyond the PC. We plan to develop security and
management products and services for newly emerging Internet access devices,
such as handheld devices, wireless Internet-enabled phones and digital music
devices. As "thin client" devices are increasingly used by consumers to access
the Internet, we will concentrate on developing value-added products and
services tailored to the unique needs of these platforms.
PRODUCTS AND SERVICES
CONSUMER PRODUCTS AND SERVICES
Consumers who visit our McAfee.com web site find a comprehensive one-stop
destination for their PC security and management needs. We have organized our
web site around seven centers to make it easy for consumers to access our
products and services and to enhance their online experience. Consumers who come
to McAfee.com see a home page that highlights our seven product and service
centers which provide an integrated solution that enables them to secure,
repair, update and upgrade their PCs. These centers consist of the McAfee
Clinic, Anti-Virus Center, Y2K Center, PC Checkup Center, Shopping Center,
Download Center and Support Center. Our web site also provides consumers with
information regarding PC security and management issues.
Our goal is to provide the consumer with a comprehensive set of service
offerings through our various centers, including:
- applications that perform PC security and management services, such as
the VirusScan Online and ActiveShield programs found in our McAfee Clinic
and Anti-Virus Center, all of which can be run using our easy-to-use web
browser interface;
- content that provides consumers with information regarding PC security
and management issues, such as the Virus Information Library found in our
Anti-Virus Center and the Y2K Resource Center found in our Y2K Center;
and
- contextual e-commerce services, such as the PC Book Finder and Software
Finder, that consumers can currently access through our Shopping Center.
These contextual services provide users with personalized purchasing
recommendations tailored to their computing needs. We are planning future
deployments that will be designed to allow this technology to operate
without any
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prompting by the user across our web site. For example, a consumer using
our PC Performance Optimizer may receive recommendations for compatible
product upgrades and accessories based on the user's PC configuration,
without any prompting by the user.
McAfee Clinic. McAfee Clinic is the main center where consumers can access
all of our hosted online application services in one location. To build consumer
awareness we initially offered our McAfee Clinic products and services for free.
In September 1999, we began charging a subscription-based fee for the McAfee
Clinic. For an annual subscription fee, a consumer gains unlimited access to all
of the McAfee Clinic premium hosted application services at any time. Our hosted
applications are continuously updated, providing consumers with the most recent
software versions over the Internet. Because we host requested applications on
our servers, we have eliminated the need for consumers to take the time and disk
space required to download large applications on to their PC. The McAfee Clinic
hosted application services provide the consumer with critical PC security and
management services at a total cost designed to be lower than if the consumer
purchased each of the applications and their subsequent new version releases in
a traditional format. Though our hosted applications utilize complex proprietary
technology, they are easy for the consumer to use. Our McAfee Clinic hosted
application services consist of:
- VirusScan Online. Allows the user to scan hardware and software systems
and identify and eliminate viruses online. This service provides
consumers with a convenient, up-to-date and simple method for protecting
their PCs from viruses.
- Rescue Disk. Allows the user to create a rescue or emergency diskette
online. The user can then use this diskette in the future to start-up and
clean a PC that has been disabled by viruses.
- ActiveShield. Provides PC users with real-time, continuous, offline and
online virus protection. ActiveShield subscribers are also provided with
notices from our virus "early warning" system, which alert them to new
and rapidly breaking virus threats. These subscribers also receive our
Internet-based updating service, which automatically accesses the
McAfee.com web site when the subscriber is online, allowing subscribers
to secure the latest version of ActiveShield.
- Software Update Finder. Automatically identifies and recommends critical
software updates, fixes and patches based on the configuration of the
user's PC. The service supports more than 4,000 different titles and
updates and covers a large number of applications, games and utilities
found on a user's PC, including the most commonly used applications. In
an effort to provide user satisfaction and peace-of-mind, we pre-test
updates and applications for errors, viruses and other potential problems
before including them in our Update Finder service.
- QuickClean. Eliminates clutter from the PC's hard drive and creates
additional disk space for the user. This service scans the user's hard
drive to identify and delete unnecessary files created while the user was
browsing the web, temporary files created by applications and unnecessary
registry entries.
- Performance Optimizer. Helps the user optimize PC performance by
automatically adjusting critical configuration settings for the PC's file
system, hard drive, CD-ROM drives and graphics devices.
Anti-Virus Center. Our Anti-Virus Center integrates information regarding
viruses and their characteristics and provides consumers with a link to the
hosted application services found in our McAfee Clinic. In addition to VirusScan
Online, Rescue Disk and ActiveShield, which are found in our McAfee Clinic, our
Anti-Virus Center includes:
- Virus Information Library. Provides consumers with an easily searchable
database that contains information on over 45,000 known computer viruses,
including their characteristics and detailed remedial steps, as well as
information regarding known virus hoaxes.
- Updates of VirusScan. Provides consumers with the latest version of
VirusScan.
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Other services in the Anti-Virus Center include a virus calendar that
provides information on expected trigger dates for various viruses, a virus
"early warning" e-mail service, and a visual virus risk indicator that provides
users with details regarding the severity of particular viruses.
Y2K Center. Our Y2K Center provides a critical set of scan services that
allows consumers to check their home PCs for Year 2000 compliance and locate
information on any necessary remedial actions. The Y2K Center includes:
- Hardware Analyzer. Checks to see if the PC's BIOS is Year 2000 compliant.
This service runs a series of date tests on the BIOS and proceeds to fix
the BIOS if a problem is detected.
- Software Analyzer. Checks to see if the applications installed on the
user's PC are Year 2000 compliant. Non-compliant applications are
highlighted and the user is provided with appropriate remedial
information, such as links to affected vendors' Y2K web sites.
- Database & Spreadsheet Analyzer. Checks to see if all the user's
application data files are Year 2000 compliant. Non-compliant data files
are detected and the user is provided with appropriate remedial
information.
- Y2K Resource Center. A comprehensive database of the Y2K sites of the
leading computer hardware, software and content companies on the web.
This service provides a single destination for PC users to find, access
and understand Year 2000 compliance information for all the components on
their PC.
Other services in the Y2K Center include information on potential Y2K
viruses and a Y2K Survival Kit, which provides users with a Windows version of
all the services available on the site.
PC CheckUp Center. Our PC CheckUp Center provides consumers with services
and information to help them configure and optimize their PCs online and a link
to the hosted application services offered through our McAfee Clinic. The PC
CheckUp Center consists of:
- System Information Reporter. Provides a detailed report regarding the
configuration of the user's PC. The report can then be used to
troubleshoot the PC or alter its configuration.
- Windows Advisor. An online help desk providing answers to frequently
asked questions and problems experienced by Windows users. Windows
Advisor uses a simple question and answer format to provide the user with
a detailed step-by-step approach to solving a Windows problem.
Shopping Center. The Shopping Center is a destination for consumers looking
for a trusted source to purchase hardware, software, peripherals and accessories
on the Internet. At the Shopping Center, a customer can shop for the best prices
on PC peripherals and accessories and find and purchase related software and
books. The Shopping Center consists of:
- The McAfee Store. Provides consumers with a source for all McAfee branded
products, including VirusScan, McAfee Office and other McAfee utilities.
- The McAfee Comparative Shopping System. Provides users with a service to
help them to learn about and shop for PC peripherals. Developed in
partnership with Cadabra, the comparative shopping service allows the
user to enter the features, price range and qualities of the product the
user is shopping for, generates a list of items tailored to these
characteristics and then assists the user in locating online vendors that
offer the most attractive prices for the product.
- The McAfee Book Store. A source for technical and "how-to" books about PC
hardware, software applications and operating systems, developed in
partnership with fatbrain.com.
- The Software Store. Provides consumers with a wide variety of business,
game and personal software in partnership with Beyond.com. The store
provides users with an extensive one-stop shopping destination for PC
software products.
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- The McAfee Software Finder. A service that provides users with
recommended software purchases based on the user's PC configuration,
attached peripherals and resident software.
- The McAfee Book Finder. An application service based on our contextual
e-commerce technologies. This service identifies the user's PC
configuration, attached peripherals and resident software and then
provides the user with information regarding relevant technical books and
training for the user to purchase.
Download Center. The Download Center provides users with an array of free
evaluation software. At the Download Center, users can, for a limited trial
period, download fully-functional versions of a number of McAfee products. To
access these evaluation software titles, users are required only to register
their names and e-mail addresses with us. The Download Center offers the latest
virus signature files to all users, while subscribers can use the Download
Center to upgrade their applications to the latest versions. The Download Center
is also a destination where users can obtain popular browser plug-ins, such as
RealPlayer and Adobe Acrobat Reader.
Support Center. The Support Center provides our customers with all the
necessary services to register McAfee.com products, receive online product
support, communicate with us and provide feedback on our web site and services.
Services in the Support Center include:
- Online Technical Support Services. Includes a database of answers to
frequently asked questions, contact information for online and phone
support and other support related services.
- Customer Care Services. Allows us to address questions regarding
customers' billing and other transactional issues. Customers can use this
service to request refunds, rebates and product returns.
- Software Registration Services. Allows customers to register their
McAfee.com software, enabling us to track and manage update and upgrade
commitments in connection with our license agreements.
- Feedback Services. Provides customers with an online mechanism to give us
feedback regarding our products and services. Information from customers
is directly routed to the appropriate departments for quick analysis and
corrective action.
- Manual Downloads. Allows our customers to download free electronic
documentation for all our products.
Oil Change. In October 1998 we introduced Oil Change, our initial hosted
application, based on technology acquired in Network Associates' purchase of
CyberMedia. Oil Change allows consumers to, among other things, update and
upgrade their computer software on their computer online without having to use
Microsoft's Internet Explorer browser. As part of our recent redesign of the
McAfee.com web site, we separated the various elements of Oil Change to make it
easier and more intuitive for subscribers to use and find them. Oil Change
subscribers can now utilize:
- the Software Update Finder in our PC Checkup Center to list their
installed software and find the latest software updates to download;
- the Software Finder in our Shopping Center to find a wide range of
software, upgrades and related products; and
- PC Book Finder in our Shopping Center to find and purchase
computer-related books.
Network Associates sells subscriptions to Oil Change through its sale of "shrink
wrapped" versions in non-online channels. The renewal process for Oil Change
sold by both Network Associates and McAfee.com is hosted by McAfee.com. We are
attempting to convert current Oil Change subscribers, including those who
purchased from Network Associates, into McAfee Clinic subscribers.
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ADVERTISING SERVICES
Our advertising services include banner advertising and sponsorships and
our planned contextual advertising. We use DoubleClick to sell banner
advertisements on our web site. Sponsorships allow a company to sponsor a
service on our web site. For example, fatbrain.com sponsors our book store. To
date we have originated our own sponsorship arrangements, which may provide
slotting fees payable to us by the sponsor and ongoing fees or revenue sharing
arrangements. We are currently developing our contextual advertising service,
which will allow advertisers to target their advertisements to users based on
their PC configuration, attached peripherals and resident software.
MARKETING AND SALES
Our marketing and sales strategy is designed to increase revenue
opportunities by:
- building increased brand recognition among PC users of the McAfee.com
name;
- increasing traffic to our web site; and
- increasing consumer adoption of our hosted application services for PC
security and management.
We are taking a number of actions to increase our brand recognition and
increase traffic to our web site. Initially, traffic to our web site resulted
only from word-of-mouth and favorable reviews in computer publications. In July
1999, we launched our first advertising campaign, using a combination of
television, radio, print and online advertising. Television advertising includes
nationwide broadcast and cable networks in major metropolitan areas. We have
focused our print advertising on technology-oriented publications and mass
market publications that frequently highlight technology issues, such as
Business Week and Newsweek. We intend to continue using the unique resources of
the Internet, as well as traditional media, in our marketing effort to further
build brand recognition. We have pursued and plan to continue pursuing strategic
arrangements with content providers, other web sites, PC manufacturers, and
other Internet access providers to build brand recognition and drive sales of
McAfee products.
We aim to increase consumer adoption of our hosted application services by
first encouraging consumers to register when they visit our web site and then
converting registered users to paying subscribers. To convert visitors into
registered users, we offer them a variety of free services, including an
e-mail-based virus notification service, our McAfee Briefcase, a free e-mail,
calendar and file sharing service that is co-branded with Visto, and McAfee
Downloads, a software evaluation service. When users of our web site register
for these free products we ask their permission to market products and services
to them. From the launch of our web site through September 1, 1999, over six
million users registered for our free services. We also offer a 14-day free
trial subscription to McAfee Clinic with the goal of converting trial
subscribers to paid subscribers.
To convert registered users to paying subscribers and to sell new products
to existing customers, we continuously seek to expand the features and functions
of our web site and online marketing activities. We also regularly invite our
trial subscribers to return to our web site more often through online methods
such as e-mail-based virus alerts, update alerts and targeted product offers. We
have found that new virus outbreaks often trigger an increased level of activity
across all our services. Services such as McAfee Dispatch and the virus early
warning system in ActiveShield increase return visits from our user base. We
plan on expanding this service to notify customers about new services, new
products and breaking product-related news. On September 2, 1999, we began
charging a subscription fee for McAfee Clinic. To drive adoption of our paid
services, we recently began direct mail and direct e-mail marketing campaigns
targeted at our installed base of over 900,000 McAfee Clinic trial subscribers,
six million registered users of our web site and the large number of existing
McAfee users, which we estimate at over 30 million. Our automatic e-mail based
campaign management system is capable of executing multiple e-mail campaigns.
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We plan on utilizing our contextual e-commerce technologies to provide
targeted marketing to convince our existing subscribers to make more product
purchases on our web site. We plan on using our contextual services, such as
Book Finder, Software Finder and our planned Hardware Finder, to provide
personalized purchase recommendations to subscribers when they return to our web
site. These purchase recommendations are based on the user's PC configuration,
attached peripherals and resident software and, as a result, are highly relevant
to the user.
STRATEGIC RELATIONSHIPS
We seek to create strategic relationships that will provide us with revenue
opportunities, increase the traffic to our web site, build and enhance the
content available to our users, and offer greater distribution of our products
and services. Our strategic arrangements may include:
Reseller Arrangements. Under these arrangements, our reseller partners
purchase our products from us and distribute them to their customers. For
example, we have a reseller arrangement with Beyond.com, which sells our
products on its web site and operates our Software Store on a reseller basis.
America Online also resells our products on a purchase order basis for resale to
its subscribers.
OEM Arrangements. Under these arrangements, our OEM partners bundle our
products and services with third-party software and hardware products. For
example, we have OEM relationships with Dell, Compaq, Hewlett-Packard and
Gateway, which bundle a trial version of our VirusScan software with their
consumer PCs. We are currently pursuing relationships whereby computer OEMs,
Internet access providers and others will bundle trial subscriptions for our
online hosted applications.
Sponsorship Arrangements. Under these arrangements, many of which are
exclusive, third parties offer their products and services on our web site.
These arrangements not only allow third parties to have revenue opportunities,
but also allows them to permanently display branding information. For example,
fatbrain.com, a leading provider of technical books, sponsors our bookstore, and
Beyond.com sponsors our software store where users can purchase McAfee and other
software products.
Co-hosting Arrangements. Under these arrangements, we partner with third
parties to provide co-branded services on our web site. Through Visto
Corporation, we offer McAfee Briefcase, which provides our users with free
e-mail and calendar services. Through Cadabra, we offer a comparative shopping
service that allows users to shop for consumer electronics based on price and
other desired features.
MCAFEE.COM HOSTED APPLICATION TECHNOLOGIES
Our hosted application technologies enable users to perform the complex and
vital tasks of PC security and management over the Internet. We have developed a
number of proprietary technologies, including:
- e-software -- an improved method for the delivery of software
applications via the Internet;
- contextual e-commerce -- provides targeted purchase recommendations based
on each user's PC configuration, attached peripherals and resident
software; and
- contextual advertising -- extends our contextual e-commerce technology by
targeting advertisement opportunities for our advertising customers based
on each user's PC configuration, attached peripherals and resident
software.
E-software. Our e-software architecture enables our hosted application
services, including VirusScan Online, Disk Clean, Software Update Finder and PC
Checkup. This three-tiered architecture separates (1) the user interface, (2)
the software application logic and application support and (3) product database
into discrete modules that integrate into a single, multi-tiered, web-based
environment.
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When a user selects an online application from our web site, our Internet
servers authenticate the user's identity and then automatically download the
most recent version of the selected application logic and application support
and product database information. The user can then execute the hosted
application with a single mouse click. After the application analyzes the user's
PC configuration, attached peripherals and resident software, the application
will advise the user to take steps to secure, repair, update and upgrade their
PC.
Our three-tiered architecture, which is incorporated in all of our hosted
applications, allows components of different layers to change independently of
one another. By deploying this architecture, we:
- reduce the amount of disk space on a user's PC required to store an
application;
- enable any-time, any-place access to these critical services;
- minimize the amount of data traffic from the server to a user's PC
required to launch the application; and
- develop an efficient way to maintain up-to-date applications on our
server;
This architecture is also designed to address consumer security and privacy
concerns by performing the analysis locally, limiting the information retrieved
by our servers and by transmitting information to and from us anonymously.
Moreover, our hosted applications can only be executed when the user is
connected to the secure McAfee.com web site. This ensures that hackers cannot
remotely activate our applications and gain access to our subscribers' private
PC information.
Contextual e-commerce. Our e-commerce service scans and analyzes each
user's PC configuration, attached peripherals and resident software and
recommends highly personalized upgrades, books and other related products. For
example, a user with Microsoft Office 97 may be presented with options to
purchase Microsoft Office 2000 upgrades, as well as related books, training
videos and other accessories. We have designed the proprietary content format,
detection mechanism and delivery methods to scale rapidly to support thousands
of users, products and updates and upgrades.
Contextual advertising. Our online advertising technology provides
contextual advertisements and banners based on each user's PC configuration,
attached peripherals and resident software. For example, a user with 32
megabytes of RAM may be served advertisements for memory upgrades compatible
with their PC and individual need.
HARDWARE INFRASTRUCTURE
Our web site, including the hardware infrastructure, is designed to be
highly reliable, scalable and redundant and provide 24-hour-a-day,
seven-day-a-week availability to the large number of consumers using our web
site daily, as well as the increased number of visitors during significant
events, such as a new virus outbreak.
Our web site is built upon an array of servers running off-the-shelf
Microsoft software. The system is comprised of sub-systems that operate in a
modular manner for each part of the web site. Our system is designed so that no
single function is mission critical. As a result, for example, if a particular
service goes down, our other services should remain available. Our servers are
operated in a clustered environment in an effort to maintain 100% uptime even if
an entire cluster or subset is unavailable. Except for information provided by a
separate database, services and data are local to each server. To maintain
consistency and speed of implementation, we use scripts, which are predefined
sets of software instructions, to install software on new servers added to our
infrastructure, eliminating the need to manually configure new servers. Our
in-house infrastructure is housed in a telecom grade data center with redundant
power, air and physical carrier connections. We also maintain daily backups at
an offsite storage facility and distribute information daily to our co-location
providers described below.
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We connect to the Internet through multiple vendors. Currently, we have
vendor relationships with four large Internet carriers and a carrier aggregator
which reaches other Internet carriers. These multiple relationships provide us
with the ability to balance traffic loads under peak demand and provide for
redundancy should any one carrier suffer an outage. We also use six different
co-location providers globally that maintain significant data centers in
multiple locations. These co-location providers enhance both the speed of
download and system redundancy should a disaster arise. For example, an
individual in Europe can download software from our co-location provider in
Hamburg, Germany, resulting in less download time than if the user had to
download the software from a U.S. location. If our web site server in Santa
Clara, California fails, web site servers will be activated at our co-location
providers, enabling continued consumer access to our web site. With limited
exceptions, we maintain our own infrastructure for purposes of consistency,
quality and security. Our systems are audited internally and externally for
performance and for security issues on a regular basis.
PRODUCT DELIVERY AND CUSTOMER PAYMENT
We have contracted with Beyond.com and CyberCash to provide our product
delivery and payment services. Beyond.com provides fulfillment for software
products sold on our web site for both electronic distribution and
"shrink-wrapped" box distribution to customers.
Credit card payment services for subscriptions and the recently introduced
McAfee One-Click-Buy service are provided to us by CyberCash. The McAfee
One-Click-Buy service provides the customer the convenience of entering credit
card information once upon the initial purchase without requiring re-entry upon
purchases during subsequent visits.
We have agreements with these companies that guarantee us levels of
acceptable service to our customers and regular monthly product and revenue
reports.
PRODUCT DEVELOPMENT
We believe that strong product development capabilities are essential if we
are to offer our subscribers innovative and up-to-date online PC security and
management products and services. Accordingly, our future success depends on our
ability to continually enhance existing products and to introduce new and
innovative products and services that satisfy our subscribers' PC security and
management requirements. We intend to introduce our Hardware Finder application,
which will include a contextual product upgrade and recommendation service, a
searchable online technical support yellow pages, and launch our contextual
advertising service. To meet these challenges, we have made and expect to
continue making substantial investments in product research and development.
These product and service innovations are complex and frequently require long
development cycles. Future revenue from these innovations may be insufficient to
recover the development costs.
As of August 31, 1999, we had 37 engineers engaged in the development of
our new or improved products and services. A majority of our engineers are
dedicated to the improvement of our existing online PC security and management
products and services and most of our remaining development engineers are
currently working on our contextual e-commerce and advertising services. Before
we develop new or improved products, we work with our subscribers to understand
current problems and emerging requirements to assist our development process.
Our engineers then seek to design and implement appropriate changes or additions
to our applications or product knowledge engines and databases.
COMPETITION
In the market for anti-virus software products, we compete primarily
against Symantec and Trend Micro Systems, who offer software licenses to
anti-virus software products, including boxed products sold through retail store
channels. In the market for hosted PC security and management solutions, we
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<PAGE> 51
compete primarily against existing PC utility vendors such as Symantec and Trend
Micro Systems. In particular, Symantec has an online anti-virus service and
Trend Micro Systems offers an online hosted anti-virus service. In the future,
we may also compete against PC and system vendors such as Dell, Compaq, IBM,
Gateway and Intel looking to provide a higher level of support and service to
their customers. In particular, Dell has announced an online customer support
initiative including online PC management services. Operating system and
application vendors such as Microsoft provide or plan on providing hosted
services to better manage Windows-based PCs. Online PC content sites such as
CNET and ZDNet provide or have announced their intention to provide hosted
services to enhance their web sites. We are also aware of smaller
entrepreneurial companies that are focusing significant resources on developing
and marketing these services to consumers.
In the market for e-commerce and advertising, we compete on the basis of
number of visitors, product line depth, time spent at the site and return
visits. We compete primarily with established online retailers such as
Beyond.com, Gigabuys.com, Outpost.com and PC-related content sites such as CNET
and ZDNet. In addition, we compete with online comparative shopping services
provided by sites like Yahoo!, Excite and Amazon.com.
We believe that the principal competitive factors in attracting visitors to
our web site and converting them into paying subscribers and product purchasers
are:
- market acceptance of delivery of PC security and management services via
the Internet;
- brand recognition and reputation for providing trusted products and
services;
- the level of security of the products and services provided;
- price;
- the level of quality of the products and services provided;
- convenience and breadth of products and service offered;
- the quality and market acceptance of new enhancements to our current
services and features; and
- strategic arrangements with third parties.
INTELLECTUAL PROPERTY
We regard substantial elements of our web site and the underlying
technology as proprietary. We own three pending patent applications related to
our method of delivering software applications online. Because we own these
patent rights, rather than licensing them from Network Associates, we can assert
them independently of Network Associates to protect our technology. We will also
be the sole owners of patent rights in any inventions developed by our
employees. Other than these patents, we do not own much of the core technology
or intellectual property underlying our current products and our currently
planned products. We currently license copyrights, patents and trademarks from
Network Associates pursuant to a cross license agreement. Among other things,
the cross license agreement:
- restricts our use of the licensed technology to providing single-user
consumer licenses for our products and services sold over the Internet or
for Internet-based products and licensing the technology to OEMs for sale
to individual consumers;
- allows Network Associates to continue to sell "shrink-wrapped" boxed
products incorporating the licensed technology through non-online
distribution channels;
- prevents us from offering non-Network Associates based products if
Network Associates offers a competitive product;
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<PAGE> 52
- grants to Network Associates a license to all derivative works that we
create based on the technology that we license from Network Associates;
- does not enable us to independently enforce Network Associates'
intellectual property rights in the licensed technology against third
parties; and
- allows Network Associates to terminate the cross license if we fail to
cure any material breach of the cross license within 30 days after being
notified by Network Associates of the breach, subject to mandatory
dispute resolution prior to the effectiveness of any proposed
termination.
We rely to a significant extent on Network Associates to protect the
technology that it licenses to us through a combination of patent, trademark,
trade secret and copyright law and contractual restrictions. Despite precautions
that we and Network Associates may take, third parties could copy or otherwise
obtain or use the proprietary information without authorization or to develop
similar technology independently. If Network Associates fails to adequately and
timely protect the technology it licenses to us, our business may be adversely
affected. Network Associates has been, currently is and in the future may be
subject to litigation regarding the technology licensed to us. Adverse
determinations in that litigation could result in the loss of Network
Associates', and as a result our, intellectual property rights, which could
prevent us from selling our products. In addition, we could be subject to
significant liabilities or Network Associates and/or we could be required to
seek licenses from third parties.
The McAfee.com web site address, or domain name, and the McAfee trademark
are important to our business and are licensed to us by Network Associates. If
we were to lose the McAfee.com domain name or the use of this trademark, our
business would be harmed, and we would need to devote substantial resources
towards developing an independent brand identity.
Legal standards relating to the validity, enforceability and scope of
protection of some proprietary rights in Internet-related businesses are
uncertain and still evolving, and we can give no assurance regarding the future
viability or value of any of our proprietary rights.
Litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets or trademarks or to determine the
validity and scope of the proprietary rights of others. Litigation could result
in substantial expenses and diversion of resources and management attention.
Furthermore, other parties may assert infringement claims against us or Network
Associates. These claims and any resulting litigation, should it occur, might
subject us to significant liability for damages or an injunction against
marketing our products, and, even if not meritorious, might result in
substantial expenses and diversion of resources and management attention. Under
the terms of an indemnification agreement with Network Associates, it has agreed
to indemnify and defend us and hold us harmless from any losses as a result of
intellectual property claims known prior to the consummation of this offering.
EMPLOYEES
As of August 31, 1999, we had 66 full-time-equivalent employees. We
consider our relations with our employees to be good. We have never had a work
stoppage, and none of our employees is represented by collective bargaining
agreements. We believe that our future success will depend in part on our
ability to attract, integrate, retain and motivate highly qualified personnel,
and upon the continued service of our senior management and key technical
personnel. None of our key personnel are bound by employment agreements.
Competition for qualified personnel in our industry and in the San Francisco Bay
Area is intense. We may be unsuccessful in attracting, integrating, retaining
and motivating a sufficient number of qualified employees to conduct our
business in the future.
FACILITIES
Our principal executive and corporate offices and network operations center
are located in Santa Clara, California. These facilities consist of
approximately 19,500 square feet. These facilities are leased
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<PAGE> 53
and provided to us by Network Associates at an approximate monthly cost of
$27,000, charged to us under our corporate management services agreement with
Network Associates. We are currently evaluating our need for additional space as
we continue to expand our current operations, and believe that additional space
can be obtained if needed.
LEGAL PROCEEDINGS
From time to time, we may be involved in legal proceedings and litigation
arising in the ordinary course of business. As of the date of this prospectus,
we are not a party to any litigation or other legal proceeding that, in our
opinion, could have a material adverse effect on our business, operating results
or financial condition.
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<PAGE> 54
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth information with respect to our executive
officers, directors and other key employees as of September 1, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Srivats Sampath(1)............ 40 President and Chief Executive Officer, Director
Vice President, Chief Financial Officer and
Evan Collins(1)............... 36 Secretary
William Larson(2)............. 43 Chairman of the Board of Directors
Prabhat Goyal(3).............. 45 Director
Frank Gill(2)(3).............. 55 Director
Richard Schell(2)(3).......... 49 Director
Chandrasekar
Balasubramaniam............. 32 Chief Technology Officer
Lisa Romano................... 42 Vice President, Marketing
Jeffrey Platon................ 40 Vice President, Sales
Doug Cavit.................... 40 Vice President, Web and Information Technology
Ravi Lingarkar................ 35 Vice President, Engineering
Gregory Wharton............... 29 General Counsel
</TABLE>
- -------------------------
(1) Executive Officer
(2) Member of Compensation Committee
(3) Member of Audit Committee
EXECUTIVE OFFICERS AND DIRECTORS
Srivats Sampath has served as our President and Chief Executive Officer
since December 1998. Mr. Sampath has over 15 years of experience serving in
management and executive roles in the computer industry. From June 1998 to
December 1998, Mr. Sampath served as the Vice President of Worldwide Marketing
of Network Associates. From June 1996 to December 1997, Mr. Sampath served as
the Vice President of Product Marketing for Netscape Communications, a provider
of Internet software and services. From June 1993 to June 1996, Mr. Sampath
served as the President and Chief Executive Officer of Discussions Corporation,
a company that he founded to develop e-mail based groupware solutions. From 1991
to 1993, Mr. Sampath served as the Director of Product Marketing for Network and
Security Products of Central Point Software, Inc. From 1984 to 1991, Mr. Sampath
managed the LAN Enhancement Operations and Microcomputer Communications Division
of Intel Corporation. Mr. Sampath also serves on the boards of WebTrends
Corporation and Cadabra.com. Mr. Sampath received his B.S. degree in electronics
and telecommunications engineering from Madras University in India.
Evan Collins has served as our Vice President, Chief Financial Officer and
Secretary since July 1999. From September 1996 to July 1999, Mr. Collins was
Corporate Controller of Network Associates. From August 1989 to September 1996,
Mr. Collins held various financial positions at Sun Microsystems, a manufacturer
of open systems software and hardware. Mr. Collins received his B.S. degree in
electrical engineering from Stanford University and an MBA from Duke University.
William Larson has served as a Director and Chairman of the Board of
McAfee.com since our formation in December 1998. Since September 1993, Mr.
Larson has served as Chief Executive Officer of Network Associates, and since
October 1993 he has served as President and a director. Since April 1995, Mr.
Larson has been the Chairman of the Board of Directors of Network Associates.
Mr. Larson also serves on the board of directors of BackWeb Technologies, an
Internet software company.
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<PAGE> 55
Mr. Larson received his B.S. degree from the Wharton School of the University of
Pennsylvania and a J.D. from Stanford University.
Prabhat Goyal has served as a director at McAfee.com since September 1999.
Since March 1996, Mr. Goyal has served in various capacities at Network
Associates. Since July 1996, he has served as Vice President of Finance and
Chief Financial Officer, and from March 1996 to June 1996, he served as
Corporate Controller and Treasurer of Network Associates. From November 1991 to
March 1996, Mr. Goyal was employed in various capacities ultimately serving as
Director, Finance and OEM Development, of the Solaris Products Group of SunSoft,
Inc., a software company. Mr. Goyal received his B.S. in economics from the
London School of Economics and an MBA from the University of Chicago. Mr. Goyal
is also a Chartered Accountant and member of the Institute of Chartered
Accountants in England and Wales.
Frank Gill has served as a director at McAfee.com since September 1999. Mr.
Gill is a 23-year veteran of Intel Corporation where he held a variety of
positions in sales and marketing, product development, and manufacturing
operations. At the time of his retirement in June 1998, he was an Executive Vice
President of Intel. Mr. Gill also serves as a director of Inktomi Corporation,
Logitech, Inc., Sequent Computer Systems, Inc., Tektronix, Inc. and Telecom
Semiconductor. Mr. Gill received his B.S. degree in electrical engineering from
the University of California at Davis.
Richard Schell has served as a director at McAfee.com since September 1999.
Dr. Schell has spent 20 years in the high-tech industry. Most recently, from
October 1994 to February 1998, Dr. Schell served as Senior Vice President at
Netscape Communications where he led the engineering team and then moved on to
head up the Client Product Division. Prior to Netscape, from January 1993 to
October 1994, Dr. Schell was Vice President of Engineering at Central Point
Software, now part of Symantec. From 1989 to 1992, Dr. Schell served as Vice
President of the Languages and Database business for Borland International. Dr.
Schell received his A.B., M.S. and Ph.D. in computer science from the University
of Illinois.
Our executive officers are appointed by our board of directors and serve at
their discretion. There are no family relationships among any of our directors
or executive officers.
KEY EMPLOYEES
Chandrasekar Balasubramaniam has served as our Chief Technology Officer
since August 1999. From April 1999 to August 1999 Mr. Balasubramaniam was
Director of Architecture of Network Associates, and from September 1998 to April
1999 he was a Senior Architect at Network Associates. From June 1996 to
September 1998, Mr. Balasubramaniam was a Senior Software Engineer of
CyberMedia, Inc., which was acquired by Network Associates in September 1998,
where, among other things, he designed and implemented CyberMedia's flagship
Internet and e-commerce product Oil Change. From 1991, to June 1996, Mr.
Balasubramaniam worked at several companies in India where he was employed in
various capacities ranging from development to management of Internet related
products and services. Mr. Balasubramaniam received his B.Sc. degree from the
University of Madras in India.
Lisa Romano has served as our Vice President, Marketing since August 1999.
From August 1997 to August 1999, Ms. Romano ran her own consulting practice
where she acted as principal in projects developing strategies for subscriber
and content acquisition, marketing, and electronic commerce for such clients as
E*TRADE, Netscape and Palm Computing. From June 1996 to August 1997, Ms. Romano
served as Senior Director of New Business Development at Knight-Ridder
Information, a subsidiary of Knight-Ridder Corporation, with responsibility for
worldwide development of online consumer and enterprise markets. From 1984 to
February 1996, Ms. Romano worked at Apple Computer where she held a variety of
marketing management positions for networking and communica-
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tions products. Ms. Romano received her B.S. in marketing from Villanova
University and an MBA from Suffolk University.
Jeffery Platon has served as our Vice President, Sales since September
1999. Prior to joining McAfee.com, Mr. Platon served as Vice President, Business
Development and OEM Sales of Network Associates from February 1997 to September
1999. From April 1995 to February 1997, Mr. Platon was Vice President of
Worldwide Sales and Marketing at Rexon, Inc., a data storage solutions company.
From April 1992 to April 1995, Mr. Platon served in several executive capacities
in marketing and business development at Exabyte Corporation, a network storage
and backup company. Prior to Exabyte, Mr. Platon held several executive
positions in sales, marketing and product marketing at Burroughs/ Unisys
Corporation. Mr. Platon received his B.A. degree in business administration from
the University of Texas.
Doug Cavit has served as our Vice President, Web and Information Technology
since July 1999. From April 1995 to July 1999, Mr. Cavit served as Director of
Information Technology of Network Associates. From September 1993 to March 1995,
Mr. Cavit served as Director of Information Technology for Trinzic Corporation,
a database software company. From April 1991 to July 1993, Mr. Cavit served as
Director of Technical Services for Halliburton Company, a diversified oilfield
services company. Mr. Cavit received his B.S. degree in geophysics and his
master's degree in geology from the University of California at Riverside.
Ravi Lingarkar has served as our Vice President, Engineering since July
1999. From June 1998 to July 1999, Mr. Lingarkar held senior engineering and
management positions at Network Associates. From November 1996 to September
1997, Mr. Lingarkar served as Principal Net Engineer at Berkeley Networks. From
October 1994 to October 1996, Mr. Lingarkar served as Principal Engineer at
Whitetree, Inc., which was acquired by Ascend Communications in February 1997.
Mr. Lingarkar has also published several papers in books, research journals, and
conference proceedings and has filed for several patents. Mr. Lingarkar received
his M.Sc. in computer science and a Ph.D. in electrical and computer engineering
from McMaster University in Canada.
Gregory Wharton has served as our General Counsel since July 1999. From
June 1998 to July 1999, Mr. Wharton served as Manager of Legal Affairs for
Network Associates. From May 1997 to June 1998, Mr. Wharton was a corporate
associate at the law firm of Wilson Sonsini Goodrich & Rosati, P.C. in Palo
Alto, California. From May 1995 to May 1997, Mr. Wharton was a corporate
associate specializing in mergers and acquisitions at the law firm of Sullivan &
Worcester LLP in Boston, Massachusetts. Mr. Wharton received his B.S. degree in
communications from Boston University and his J.D. from Yale Law School.
BOARD OF DIRECTORS
The number of our directors is currently set at five directors. In
accordance with the terms of our restated certificate of incorporation, the
terms of office of the directors are divided into three classes: Class I, whose
term will expire at the annual meeting of stockholders to be held in 2000; Class
II, whose term will expire at the annual meeting of stockholders to be held in
2001; and Class III, whose term will expire at the annual meeting of
stockholders to be held in 2002. The Class I directors are Frank Gill and
Prabhat Goyal, the sole Class II director is Srivats Sampath and the Class III
directors are William Larson and Frank Schell. At each annual meeting of
stockholders after the initial classification or special meeting in lieu
thereof, the successors to directors whose terms will then expire will be
elected to serve from time of election and qualification until the third annual
meeting following election or special meeting held in lieu thereof. We expect
that any additional directorships resulting from an increase in the number of
directors, if any, will be distributed among the three classes so that, as
nearly as possible, each class will consist of one third of the directors. This
classification structure of the board of directors may have the effect of
delaying or preventing changes in control or management of McAfee.com.
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Our bylaws provide that the authorized number of directors may be changed
by an amendment to the bylaws adopted by our board of directors or by the
stockholders. In addition, our certificate of incorporation and our bylaws
provide that, in general, vacancies on the board may be filled by a majority of
directors in office, although less than a quorum.
For so long as it owns at least 20% of our outstanding voting power,
Network Associates has agreed to vote its shares of our capital stock in favor
of the election of two independent directors. Currently, Messrs. Gill and Schell
are our two independent directors.
BOARD COMMITTEES
We have established an audit committee, a majority of whose members consist
of independent directors. We have appointed Messrs. Goyal, Gill and Schell to be
members of our audit committee. The audit committee will review, act on and
report to our board of directors on various auditing and accounting matters,
including the selection of our independent accountants, the scope of our annual
audits, fees to be paid to the independent accountants, the performance of our
independent accountants and our accounting practices.
We have established a compensation committee, a majority of whose members
consist of independent directors. We have appointed Messrs. Gill, Schell and
Larson to be the members of our compensation committee. Our compensation
committee will establish salaries, incentives and other forms of compensation
for officers and other employees. This committee will also administer our
incentive compensation and benefit plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation committee currently consists of Messrs. Gill, Schell and
Larson. Mr. Larson is a director and executive officer of Network Associates.
Prior to the offering, all compensation matters were handled by the full board
of directors.
None of the members of our compensation committee is an officer or employee
of McAfee.com. No interlocking relationship exists between our board of
directors or compensation committee and the board of directors or compensation
committee of any other company, nor has such an interlocking relationship
existed in the past.
DIRECTOR COMPENSATION
Our directors do not receive cash compensation for their services as
directors, but are reimbursed for their reasonable and necessary expenses for
attending board and board committee meetings.
We have adopted a Director Option Plan. Members of the board who are not
our employees, or employees of any parent, subsidiary or affiliate of
McAfee.com, will be eligible to participate in the plan unless they are
representatives of venture capital funds or corporate investors. The option
grants under the plan will be automatic and nondiscretionary, and the exercise
price of the options will be the fair market value of the Class A common stock
on the date of grant.
In connection with their recent addition to our board, Messrs. Gill and
Schell were each granted an option to acquire 75,000 shares of our Class A
common stock under our 1999 Stock Plan, described below. Each eligible director,
other than Messrs. Gill and Schell, who is or becomes a member of the board on
or after the effective date of the registration statement of which this
prospectus forms a part will be granted an option to purchase 40,000 shares of
our Class A common stock under our Director Option Plan. Each eligible director,
including Messrs. Gill and Schell, will automatically be granted an additional
option on the anniversary date of their service as a director to purchase shares
of Class A common stock if the director has served continuously as a member of
the board since the date of the director's initial grant.
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The options will have ten year terms, but will terminate 3 months after the
date the director ceases to be a director or 6 months after a termination if the
termination is due to death or disability.
All options granted under the directors plan will become exercisable over a
four year period with 25% of the shares exercisable after one year and the
remainder vesting at a rate of 2.083% each subsequent month, so long as the
optionee continues as a member of the board or as a consultant of McAfee.com. In
the event of our dissolution or liquidation, or a "change in control"
transaction, options granted under the plan will become fully vested and
immediately exercisable if not otherwise assumed or substituted by the acquiror,
or if the optionee does not continue to serve as a director.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued during 1998
to our Chief Executive Officer. There were no other executive officers employed
by us during 1998. The table also sets forth compensation on an annualized basis
for our Chief Executive Officer and our Chief Financial Officer for the fiscal
year ending December 31, 1999. There were no other executive officers as of
August 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES 1999
------------------ UNDERLYING ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS SALARY
--------------------------- -------- ------- ------------ --------
<S> <C> <C> <C> <C>
Srivats Sampath............................................. $112,769 $15,652 -- $240,000
President and Chief Executive Officer
Evan Collins................................................ -- -- -- 175,000
Vice President, Chief Financial Officer and Secretary
</TABLE>
OPTION GRANTS
No options to purchase our common stock were issued during the year ended
December 31, 1998. Options to purchase an aggregate of 4,539,850 shares of our
Class A Common Stock have been granted as of September 22, 1999. The table set
forth below provides summary information regarding stock options granted to our
Chief Executive Officer and our Chief Financial Officer in the eight months
ended August 31, 1999. There were no other executive officers as of August 31,
1999.
All options granted to these executive officers are immediately exercisable
and nonqualified stock options and vest over four years at the rate of 25% of
the shares subject to the option on the first anniversary of the date of grant
and 2.083% each subsequent month. The options expire ten years from the date of
grant and were granted at an exercise price equal to the fair market value of
our common stock on the date of grant, as determined by the board.
All options were granted at an exercise price equal to the fair value of
the common stock on the date of grant. The fair value was based on third party
valuations at the date of grant.
Potential realizable values are computed by (a) multiplying the number of
shares of Class A common stock issuable upon exercise of a given option by the
exercise price per share, (b) assuming that the aggregate stock value derived
from that calculation compounds at the annual 5% or 10% rates shown in the table
for the entire ten year term of the option and (c) subtracting from that result
the aggregate option exercise price. In addition, potential realizable values do
not take into account taxes associated with exercise, if any. The 5% and 10%
assumed annual rates of stock price appreciation are mandated by
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the rules of the Securities and Exchange Commission and do not represent our
estimate or projection of future common stock prices.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED TO TERM
OPTIONS EMPLOYEES DURING EXERCISE PRICE EXPIRATION -----------------------
NAME DATE OF GRANT GRANTED PERIOD ($/SHARE) DATE 5% 10%
---- ------------- ---------- ------------------ -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Srivats Sampath...... 1/15/99 900,000 39.2% $3.67 1/15/09 $2,077,239 $5,264,131
Evan Collins......... 7/1/99 100,000 4.4 4.64 7/1/09 291,807 739,497
</TABLE>
OPTION EXERCISES AND HOLDINGS
No options were granted prior to January 1999. Therefore there were no
options held by any of the executive officers as of December 31, 1998. In
addition, there have not been any option exercises to date.
STOCK PLANS
1999 Stock Plan. Our 1999 Stock Plan provides for the granting to employees
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code, or Code, and for the granting to employees, directors and
consultants of nonstatutory stock options and stock purchase rights, or SPRs.
The 1999 Stock Plan was approved by the board of directors and by our sole
stockholder in January 1999. Unless terminated sooner, the 1999 Stock Plan will
terminate automatically in 2009. A total of 8,388,000 shares of Class A common
stock is currently reserved for issuance pursuant to the 1999 Stock Plan, plus
the Plan provides for automatic annual increases on the date of the annual
stockholders' meeting, equal to the lesser of:
- 2,500,000 shares of Class A common stock;
- 5% of the outstanding shares of all common stock on that date; or
- an amount determined by our Board of Directors.
As of September 22, 1999, options to purchase 4,539,850 shares of Class A common
stock were outstanding under the 1999 Stock Plan with a weighted average
exercise price of $4.31, and 3,848,150 shares were available for future grants.
The 1999 Stock Plan may be administered by our board of directors or a
committee of our board of directors, and the administrator shall, in the case of
options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, consist of two or more "outside
directors" within the meaning of Section 162(m) of the Code. The administrator
has the power to determine the terms of the options or SPRs granted, including
the exercise price, the number of shares subject to each option or SPR, the
exercisability thereof, and the form of consideration payable upon such
exercise. Our board of directors has the authority to amend, suspend or
terminate the 1999 Stock Plan, provided that no such action may affect any share
of Class A common stock previously issued and sold or any option previously
granted under the 1999 Stock Plan.
Options and SPRs granted under the 1999 Stock Plan are not generally
transferable by the optionee. Options granted under the 1999 Stock Plan must
generally be exercised within three months of the optionee's termination of
service with McAfee.com, or within twelve months after such optionee's
termination by death or disability, but in no event later than the expiration of
the option's ten year term. In the case of SPRs, unless the administrator
determines otherwise, the stock purchase agreement shall grant McAfee.com a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with McAfee.com for any reason (including death or
disability). The purchase price for shares repurchased pursuant to the
restricted stock purchase agreement shall be the original price
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paid by the purchaser. The repurchase option shall lapse at a rate determined by
the administrator. The exercise price of all incentive stock options granted
under the 1999 Stock Plan must be at least equal to the fair market value of the
Class A common stock on the date of grant. The exercise price of nonstatutory
stock options and SPRs granted under the 1999 Stock Plan is determined by the
administrator, but with respect to nonstatutory stock options intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code, the exercise price must at least be equal to the fair market value
of the Class A common stock on the date of grant. The term of all incentive
stock options granted under the 1999 Stock Plan may not exceed ten years or five
years if the optionee is a 10% stockholder at the time of grant. The 1999 Stock
Plan does not specify a term for nonstatutory options.
The 1999 Stock Plan provides that in the event of a merger of McAfee.com
with or into another corporation or a sale of substantially all of McAfee.com
assets, each option or right shall be assumed or an equivalent option or right
substituted by the successor corporation. If the outstanding options or rights
are not assumed or substituted as described in the preceding sentence, the
administrator shall notify the optionee that he or she will have the right to
exercise the option or SPR as to all of the optioned stock, including shares as
to which he or she would not otherwise be exercisable, for a period of fifteen
(15) days from the date of such notice, and the option or SPR will terminate
upon the expiration of such period.
1999 Director Option Plan. Non-employee directors are entitled to
participate in the 1999 Director Option Plan. The Director Plan was adopted by
the board of directors in September 1999 and approved by our sole stockholder in
September 1999, but it will not become effective until the date of this
offering. The Director Plan has a term of ten years, unless terminated sooner by
the board. A total of 150,000 shares of Class A common stock have been reserved
for issuance under the Director Plan, plus an annual increase as of the date of
the annual stockholders' meeting equal to the number of shares required to have
150,000 shares available for new option grants.
The Director Plan provides for the automatic grant of 40,000 shares of
Class A common stock, the "first option," to each non-employee director on the
effective date of the Director Plan, other than Messrs. Gill and Schell, who
each received an initial grant for 75,000 shares of our Class A common stock
under our 1999 Stock Plan when they joined our board in September 1999. After
the first option is granted to the non-employee director, he or she shall
automatically be granted an option to purchase 10,000 shares, a "subsequent
option," each year on his or her anniversary of service as a director. Each
first option and each subsequent option shall have a term of 10 years. The
exercise price of all options shall be 100% of the fair market value per share
of the Class A common stock, generally determined with reference to the closing
price of the Class A common stock as reported on the Nasdaq National Market on
the date of grant. Both the first and subsequent option vest as to 25% of the
shares on the first anniversary of the grant date and as to 2.083% of the shares
each month thereafter, so that the options are fully vested four years from the
grant date.
The Director Plan provides that in the event of a merger of McAfee.com with
or into another corporation or a sale of substantially all of our assets, each
option shall be assumed or an equivalent option substituted by the successor
corporation. If the outstanding options are not assumed or substituted as
described in the preceding sentence, the administrator shall notify the optionee
that he or she will have the right to exercise the option as to all of the
optioned stock, including shares as to which he or she would not otherwise be
exercisable, for a period of 15 days from the date of such notice, and the
option will terminate upon the expiration of such period. If after the merger or
asset sale, the optionee is no longer a director of either McAfee.com or the
successor corporation other than because of a voluntary resignation, the
optionee's options will become fully vested and exercisable for 90 days after
the director is no longer a member of the board.
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1999 Employee Stock Purchase Plan. The 1999 Employee Stock Purchase Plan
was adopted by the board of directors in September 1999 and by our sole
stockholder in September 1999. A total of 500,000 shares of Class A common stock
have been reserved for issuance under the 1999 Purchase Plan, plus annual
increases on the date of the annual stockholders' meeting, equal to the lesser
of:
- 1 million shares;
- 3% of the outstanding shares on such date; or
- an amount determined by the board of directors. As of the date of this
prospectus, no shares have been issued under the 1999 Purchase Plan.
The 1999 Purchase Plan, which is intended to qualify under Section 423 of
the Code contains successive 12 month offering periods. The offering periods
generally start on the first trading day on or after February 1 and August 1 of
each year, except for the first such offering period under the 1999 Purchase
Plan, which we expect will commence on February 1, 2000 and end on the last
trading day on or before February 1, 2001.
Employees are eligible to participate if they are customarily employed by
McAfee.com or any participating subsidiary for at least twenty hours per week
and more than five months in any calendar year. However, any employee:
- who immediately after grant owns stock possessing 5% or more of the total
combined voting power or value of all classes of the capital stock of
McAfee.com; or
- whose rights to purchase stock under all employee stock purchase plans of
McAfee.com accrue at a rate which exceeds $25,000 worth of stock for each
calendar year may be not be granted an option to purchase stock under the
1999 Purchase Plan. The 1999 Purchase Plan permits participants to
purchase Class A common stock through payroll deductions of up to 15% of
the participant's "compensation." Compensation is defined as the
participant's base straight time gross earnings, commissions, incentive
compensation and bonuses, but exclusive of payments for overtime, profit
sharing payments, shift premium payments and incentive payments. The
maximum number of shares a participant may purchase during a single
purchase period is 2,500 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of Class A common stock at the end of each offering period. The price of
stock purchased under the 1999 Purchase Plan is 85% of the lower of the fair
market value of the Class A common stock at the beginning date or ending date of
the purchase period. Participants may end their participation at any time during
an offering period, and they will be paid their payroll deductions to date.
Participation ends automatically upon termination of employment with McAfee.com.
Rights granted under the 1999 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1999 Purchase Plan. The 1999 Purchase Plan provides
that, in the event of a merger of McAfee.com with or into another corporation or
a sale of substantially all of our assets, offering periods then in progress may
be continued by the successor corporation. If the successor corporation refuses
to continue the offering periods then in progress, the offering periods will be
shortened and a new exercise date will be set. The 1999 Purchase Plan will
terminate in 2009. Our board of directors has the authority to amend or
terminate the 1999 Purchase Plan, except that no such action may adversely
affect any outstanding rights to purchase stock under the 1999 Purchase Plan.
401(k) PLAN
Network Associates sponsors a tax-qualified employee savings and retirement
plan which covers the eligible employees of Network Associates and McAfee.com.
For so long as Network Associates retains at
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<PAGE> 62
least an 80% ownership interest in McAfee.com, all eligible McAfee.com employees
may enter the Network Associates 401(k) Plan on the first day of any calendar
quarter. Participants may make pre-tax contributions to the 401(k) Plan of up to
15% of their eligible compensation, subject to a statutorily prescribed annual
limit ($10,000 in calendar year 1999). Each participant is fully vested in his
or her contributions and the investment earnings thereon at all times. The
401(k) Plan permits, but does not require, matching contributions on behalf of
participants. The 401(k) Plan is intended to qualify under Sections 401(a) and
401(k) of the Internal Revenue Code. Contributions by the participants, Network
Associates, or McAfee.com to the 401(k) Plan, and the income earned on these
contributions, are generally not taxable to the participants until withdrawn.
Contributions by Network Associates and McAfee.com, if any, will be deductible
when made by Network Associates and McAfee.com, respectively. 401(k) Plan assets
are held in trust. The trustee of the 401(k) Plan invests the assets of the
401(k) Plan in the various investment options as directed by the participants.
We intend to adopt our own 401(k) Plan after the consummation of this offering.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our certificate of incorporation limits the liability of directors to the
fullest extent permitted by Delaware law. In addition, our certificate of
incorporation and bylaws provide that we will indemnify our directors and
officers to the fullest extent permitted by Delaware law.
Our bylaws provide that we will indemnify officers and directors against
losses that they may incur in investigations and legal proceedings resulting
from their services to us, which may include services in connection with
takeover defense measures. These provisions may have the effect of preventing
changes in the management.
Our bylaws provide that:
- we are required to indemnify our directors and officers to the fullest
extent permitted by Delaware law, subject to limited exceptions;
- we may indemnify our other employees and agents to the extent that we
indemnify our officers and directors, unless otherwise required by law,
our certificate of incorporation, our bylaws or agreements to which we
are party; and
- we are required to advance expenses, as incurred, to our directors and
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law, subject to limited exceptions.
Prior to the completion of this offering, we intend to enter into
indemnification agreements with each of our current directors and officers to
give them additional contractual assurances regarding the scope of the
indemnification set forth in our certificate of incorporation and bylaws and to
provide additional procedural protections. At present, there is no pending
litigation or proceeding involving any of our directors, officers or employees
for which indemnification from us is sought. We are not aware of any threatened
litigation that may result in claims for indemnification from us.
We currently have liability insurance for our directors and officers and
intend to extend that coverage for public securities matters.
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RELATED PARTY TRANSACTIONS
Other than compensation agreements and other arrangements, which are
described as required in "Management," and the transactions described below,
since we were formed, there has not been, nor is there currently proposed, any
transaction or series of similar transactions to which we were or will be a
party:
- in which the amount involved exceeded or will exceed $60,000; and
- in which any director, executive officer, holder of more than 5% of our
Class A common stock on an as-converted basis or any member of their
immediate family had or will have a direct or indirect material interest.
PRINCIPAL STOCKHOLDER; CONTROL OF MCAFEE.COM
We are a wholly-owned subsidiary of Network Associates. Upon completion of
this offering, Network Associates will own all the outstanding shares of our
Class B common stock, representing % of the voting power of McAfee.com, and
% of the voting power will be owned by the public.
As a result of its ownership of Class B common stock, Network Associates
will be able to influence significantly matters affecting us and to control all
actions that require the approval of a majority of our voting power, including
amendments to our certificate of incorporation, the election of our directors
and any business combinations. However, Network Associates has agreed to vote in
the future in favor of two independent directors for our board.
INTERCOMPANY AGREEMENTS
We have entered into certain agreements with Network Associates for the
purpose of defining their ongoing relationship. These agreements were developed
in the context of a parent/subsidiary relationship and therefore are not the
result of arms-length negotiations between independent parties.
Corporate Services Agreement. We have entered into a corporate services
agreement with Network Associates effective January 1, 1999 under which it has
and will continue to provide us a number of administrative services. Under this
agreement, Network Associates is providing to us services relating to tax,
insurance, employee benefits and administration, corporate record keeping and
information technology. The initial monthly fee under the agreement is a portion
of the cost of Network Associates' provision of the services to us, including
all related expenses, that is allocated to us based on our headcount, plus a ten
percent mark-up. In addition, we may request additional services, including
legal, and accounting services, to be provided from time-to-time in the future.
The corporate services agreement may be terminated either by us on 30 days
notice or by Network Associates when it ceases to own a majority of our
outstanding voting stock. We may be unable to secure the provision of these
services from others on acceptable terms. If we are unsuccessful in obtaining
acceptable provision of services upon termination of the corporate service
agreement, our future financial performance could be adversely affected.
Registration Rights Agreement. We have entered into a registration rights
agreement with Network Associates in connection with this offering. This
entitles Network Associates, or any transferee of at least 10% of its shares, to
include its shares of our common stock in any future registration of common
stock made by us, other than any registration statement relating to an
acquisition or stock option plan. In addition, at any time after six months
after this offering, Network Associates or any transferees of at least 10% of
its McAfee.com shares can request that we file a registration statement so they
can publicly sell their shares. We have agreed pursuant to the terms of the
registration rights agreement to pay all costs and expenses, other than
underwriting discounts and commissions related to shares to be sold by
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Network Associates and expenses of legal counsel for Network Associates in
connection with any such registration.
Technology Cross License Agreement. We entered into a cross license with
Network Associates, effective on January 1, 1999.
Licensed Technology. Under the cross license, we and Network Associates
granted to each other limited rights to each others' patents, copyrights,
trademarks and trade secrets for use in defined markets. We have worldwide,
non-exclusive rights to Network Associates' patents and exclusive rights to use
Network Associates' copyright, trademark and trade secret rights to create and
deliver products and services directly or indirectly to individual consumers
over the Internet or for Internet based products. Under the agreement, Network
Associates is granted worldwide, non-exclusive rights to our patents and
exclusive rights to use our copyrights, trademarks and trade secrets to deliver
products and services to enterprise customers and individual consumers by any
means other than the Internet. Each party is also permitted to create products
derived from the technology licensed to it by the other. The creating party
retains ownership of their newly derived products but these derived products are
licensed to the other party subject to the terms of the cross license agreement.
Royalty Payments. In consideration for the rights granted under the
cross license agreement, we are required to pay Network Associates a royalty on
revenues we recognize from product and subscription sales that include Network
Associates' technology, initially at a rate of 20% commencing on January 1, 1999
and declining 1.625% per quarter until the rate is 7% in the quarter beginning
January 1, 2001, and remaining at 7% thereafter. In consideration for the rights
granted by us to Network Associates under the cross license agreement, Network
Associates is required to pay us a flat quarterly royalty of $250,000.
Limitations on Offered Products. During the term of the agreement, each
party has agreed that it will not offer products incorporating third-party
technology if those products are competitive with the products offered by the
other party.
Indemnification. Under the agreement, each party has agreed to
indemnify, defend and hold harmless the other for any losses incurred in
connection with claims arising in the covered countries that the technology
licensed under the agreement violates the patent, copyright, trademark or trade
secrets or other proprietary rights of a third party. Covered countries are
those countries that are party to the Berne Convention for the Protection of
Literary and Artistic Works, which include the U.S. and substantially all U.N.
member nations.
Term and Termination. The cross license agreement will remain in effect
indefinitely, but may be terminated:
- by mutual agreement of the parties;
- by the non-bankrupt party, in the event of a bankruptcy of the
other party; and
- by the non-defaulting party, in the event of a material breach by
the other party that remains uncured for 30 days following notice
of the breach, subject to mandatory dispute resolution prior to the
effectiveness of any proposed termination.
Asset Contribution and Receivables Settlement Agreement. We entered into an
asset contribution agreement with Network Associates effective as of January 1,
1999 that transfers ownership of assets to McAfee.com. Among the assets
transferred to McAfee.com are:
- a number of co-hosting and technology agreements to which Network
Associates is a party;
- revenues from advertising and sponsorship agreements involving
McAfee.com;
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- all ownership rights arising in connection with 3 patent
applications relating to the manner in which we deliver our
e-software applications;
- computers and internet infrastructure hardware; and
- any other assets which both Network Associates' and McAfee.com's
boards of directors agree to transfer at a future date under this
agreement.
Under the asset contribution agreement, no liabilities were transferred to
McAfee.com, except for those directly resulting from the assets transferred.
Revolving Loan Agreement. Under an intercompany revolving loan agreement we
have entered into, Network Associates has agreed to make available to McAfee.com
up to $30 million in cash as a revolving loan. The interest rate of this
revolving loan is equal to the one-month LIBOR rate. Network Associates has the
option of having us repay the entire principal and interest then outstanding
beginning on the date that is 30 days after the closing of this offering, or at
any time thereafter. If Network Associates does not request repayment prior to
that time, the revolving loan is repayable in full on January 1, 2001, the
termination date of the agreement.
Tax Sharing Agreement. We entered into a tax sharing agreement with Network
Associates effective upon effectiveness of the registration statement relating
to this offering, whereby we pay federal, state and local income tax liability
amounts to Network Associates, determined on a pro forma basis, as if we filed
our own separate income tax returns for each year. Network Associates will not
reimburse us for Network Associates' or any other group member's use of our net
operating loss or other tax benefits in any consolidated or combined return.
However, we will be able, during the term of the agreement, to take into account
our past and future net operating loss and other tax attributes for purposes of
computing our hypothetical separate income tax return liability payment to, or
refund from, Network Associates.
The tax sharing agreement will terminate if we are no longer eligible to
join Network Associates in the filing of a consolidated federal income tax
return. In the event of such termination, any net operating losses or other
carryforward amounts would not be available to us upon departure from the group.
Under the agreement, we will not be reimbursed for any such loss of tax
benefits.
Indemnification and Voting Agreement. We entered into an indemnification
and voting agreement with Network Associates which will become effective upon
the effectiveness of the registration statement relating to this offering.
Except as contemplated below, Network Associates will indemnify and defend us
and hold us harmless for all losses related to any third party claims relating
to events or circumstances arising out of actions or inaction of Network
Associates, including its subsidiaries and officers and directors, on or prior
to the completion of this offering. Matters for which Network Associates is not
obligated to indemnify us include:
- any obligations assumed by us, or payments required to be made by us,
under our agreements with Network Associates;
- any losses resulting from third party claims that are related to
intellectual property developed by us between August 20, 1999 and the
completion of this offering;
- any obligations incurred by us in the ordinary course of business;
- any losses resulting from third parties claims made against McAfee.com
alleging infringement of intellectual property rights unknown as of the
closing of this offering; and
- any losses resulting from third parties claims related to or arising from
a material misstatement contained in or material omission from this
prospectus or the registration statement of which this prospectus is a
part.
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As a result of the above indemnification, Network Associates is, for
example, required to hold us harmless from its existing litigation related to
the anti-virus technology licensed to us under the cross license agreement. In
the event of a claim relating to a product that includes components supplied by
us and components supplied by Network Associates, Network Associates has the
right to determine whether and to what extent we are entitled to
indemnification, after reasonable consultation with us.
Additionally, for so long as Network Associates owns at least 20% of our
outstanding voting power, it will vote its shares of our capital stock in favor
of the election of two independent directors.
OPTION GRANTS TO NETWORK ASSOCIATES' OFFICERS AND EMPLOYEES
In January 1999, we granted options for a total 3,420,000 shares of our
Class A common stock to four executive officers and one non-executive officer of
Network Associates at exercise price of $3.67 per share. At the time the options
were granted, they vested 25% on January 15, 2000 with 2.083% vesting each month
thereafter for the following 36 months. Vesting is based on service to Network
Associates or any subsidiary thereof. In September 1999, the aggregate number of
options granted and the amount of each individual grant, was reduced by 50%. In
exchange for this reduction, we agreed to vest in full the remaining options.
Included in these grants, as so reduced, is a grant to William Larson and to
Prabhat Goyal for 900,000 and 360,000 shares of Class A common stock,
respectively. Mr. Larson is an executive officer and director of Network
Associates and a McAfee.com director and Mr. Goyal is an executive officer of
Network Associates and a McAfee.com director.
In addition to the above option grants, as of September 22, 1999, we have
granted to other officers and employees of Network Associates options for an
additional 274,150 shares of Class A common stock at an average exercise price
of $6.55 per share. These options are fully vested.
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PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of McAfee.com's
common stock as of August 31, 1999 and as adjusted to reflect the sale of the
shares of Class A common stock offered hereby by:
- Network Associates as the sole beneficial owner of more than 5% of our
common stock;
- our named executive officers;
- each of our directors; and
- all officers and directors as a group.
The percentage of beneficial ownership for the following table is based on
36,000,000 shares of Class B common stock outstanding as of August 31, 1999 and
assuming no exercise of the underwriters' over-allotment option.
Beneficial ownership is determined in accordance with SEC rules and
includes voting or investment power with respect to the securities. Common stock
subject to options currently exercisable within 60 days of August 31, 1999 are
not deemed outstanding for purposes of computing the percentage ownership of any
other person. Unless otherwise indicated, the address for each listed person is
c/o McAfee.com Corporation, 2805 Bowers Avenue, Santa Clara, CA 95051.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES --------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
------------------------ ---------------- -------- --------
<S> <C> <C> <C>
5% STOCKHOLDER
Networks Associates, Inc........................... 36,000,000 100%
3965 Freedom Circle
Santa Clara, CA 95054
NAMED EXECUTIVE OFFICERS & DIRECTORS
Srivats Sampath.................................... -- -- --
Evan Collins....................................... -- -- --
William Larson(1).................................. 900,000 2.4%
Prabhat Goyal(2)................................... 360,000 *
Frank Gill......................................... -- -- --
Richard Schell..................................... -- -- --
All 6 directors and executive officers as a
group(3)......................................... 1,260,000 3.4%
</TABLE>
- ----------------
* Represents beneficial ownership of less than 1%.
(1) Consists of 900,000 shares issuable upon exercise of an immediately
exercisable option issued to Mr. Larson on January 15, 1999 and held in
trusts for which Mr. Larson or his wife act as trustee.
(2) Consists of 360,000 shares issuable upon exercise of an immediately
exercisable option issued to Mr. Goyal on January 15, 1999.
(3) Consists only of shares beneficially owned by the persons in footnotes (1)
and (2).
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DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, the authorized capital
stock of McAfee.com will consist of 165,000,000 shares of common stock, of which
100,000,000 are authorized as Class A common stock, $.001 par value per share,
and 65,000,000 are authorized as Class B common stock, $.001 par value per
share; and 10,000,000 shares of undesignated preferred stock, $.001 par value
per share. As of September 22, 1999 there were outstanding 36,000,000 shares of
Class B common stock all of which were held by Network Associates, no shares of
Class A common stock and options to purchase 4,539,850 shares of Class A common
stock.
COMMON STOCK
The shares of Class A common stock and Class B common stock are identical
in all respects, except for voting rights and conversion rights, as described
below.
Voting Rights. Each holder of outstanding Class A common stock is entitled
to one vote per share on all matters submitted to a vote of our stockholders,
including the election of directors, and each share of Class B common stock
entitles the holder to three votes on those matters. Except as required by
applicable law, holders of the Class A common stock and Class B common stock
vote together as a single class on all matters submitted to a vote of our
stockholders. There is no cumulative voting in the election of directors. See
"Risk Factors -- Risks Related to Our Relationship with Network Associates -- We
may be unable to pursue business opportunities available to us because of our
relationship with Network Associates," "-- Network Associates' ability to exert
control over us following this offering could result in actions that are not
consistent with the interests of our other stockholders, particularly with
respect to a change of control" and "Risk Factors -- Risks Related to this
Offering -- Provisions in our certificate of incorporation and bylaws and
Delaware law and our relationship with Network Associates may discourage
takeover attempts."
Any action that may be taken at a meeting of the stockholders may be taken
by written consent in lieu of a meeting if we receive consents signed by
stockholders having the minimum number of votes that would be necessary to
approve the action at a meeting at which all shares entitled to vote on the
matter were present and voted. This could permit us to take action regarding
certain matters without providing other stockholders the opportunity to voice
dissenting views or raise other matters.
Dividends, Distributions and Stock Splits. Holders of Class A common stock
and Class B common stock are entitled to receive dividends out of assets legally
available therefor at the same rate, at the same time and in the same amounts as
our board of directors may from time to time determine. See "Dividend Policy."
In the case of dividends or distributions payable in Class A common stock
or Class B common stock, only shares of Class A common stock will be distributed
with respect to the Class A common stock and only shares of Class B common stock
will be distributed with respect to the Class B common stock.
Neither the Class A common stock nor the Class B common stock may be
subdivided or combined in any manner unless the other class is subdivided or
combined in the same proportion.
Conversion. The shares of Class A common stock are not convertible. The
shares of Class B common stock are convertible into Class A common stock, in
whole or in part, at any time and from time to time at the option of the holder,
on the basis of one share of Class A common stock for each share of Class B
common stock converted. Each share of Class B common stock would also
automatically convert into one share of Class A common stock upon the sale or
transfer of the share of Class B common stock by the initial holder thereof,
other than to a person or entity controlling, controlled by or under common
control with the initial holder or a qualified employee stock ownership plan.
The holders of Class B common stock would have, upon conversion of their shares
of Class B common stock into Class A
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common stock, one vote per share of Class A common stock held on all matters
submitted to a vote of McAfee.com's stockholders.
Liquidation. In the event of any dissolution, liquidation, or winding up of
the affairs of McAfee.com, whether voluntary or involuntary, after payment of
the debts and other liabilities of McAfee.com, the remaining assets of
McAfee.com will be distributed ratably among the holders of the Class A common
stock and the Class B common stock, treated as a single class.
Mergers and Other Business Combinations. Upon a merger, combination, or
other similar transaction of McAfee.com in which shares of common stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, holders of the Class A common stock and Class B common stock will be
entitled to receive an equal per share amount of stock, securities, cash, and/or
any other property, as the case may be, into which or for which each share of
any other class of common stock is exchanged or changed. However, in any
transaction in which shares of capital stock are distributed, the shares so
exchanged for or changed into may differ as to voting rights and certain
conversion rights to the extent and only to the extent that the voting rights
and certain conversion rights of Class A common stock and Class B common stock
differ at that time.
Other Provisions. The holders of the Class A common stock and Class B
common stock are not entitled to preemptive rights. There are no redemption
provisions or sinking fund provisions applicable to the Class A common stock or
the Class B common stock.
All shares of Class B common stock outstanding are fully paid and
nonassessable, and all of the shares of Class A common stock to be outstanding
upon completion of this offering will be fully paid and nonassessable.
PREFERRED STOCK
We are authorized, subject to limitations prescribed by Delaware law, to
issue preferred stock in one or more series, to establish from time to time the
number of shares to be included in each series, to fix the rights, preferences
and privileges of the shares of each wholly unissued series and any of its
qualifications, limitations or restrictions. The board can also increase or
decrease the number of shares of any series, but not below the number of shares
of that series then outstanding, without any further vote or action by the
stockholders. The board may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of the common stock. The issuance of preferred
stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could, among other things, have the effect of
delaying, deferring or preventing a change in control of McAfee.com and may
adversely affect the market price of the common stock and the voting and other
rights of the holders of common stock. We have no current plan to issue any
shares of preferred stock.
Network Associates or its transferees has the registration rights with
respect to its shares of our Class A common stock described above under "Related
Party Transactions -- Intercompany Agreements -- Registration Rights Agreement."
ANTI-TAKEOVER PROVISIONS
The provisions of Delaware law, our certificate of incorporation and our
bylaws may have the effect of delaying, deferring or discouraging another person
from acquiring control of our company. Our certificate of incorporation and
bylaws contain a number of provisions that could have the effect of delaying,
preventing or discouraging a change of control of our company. These include:
- our certificate of incorporation provides for a classified board of
directors;
- our stockholders are unable, in general, to fill any interim vacancy on
our board of directors;
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- our bylaws provide that special meetings of the stockholders may be
called at any time by the board of directors, the chairman of the board
of directors, the chief executive officer, or by one or more stockholders
holding shares in the aggregate entitled to cast 10% or more of the vote
of all shares of our stock; and
- stockholders must follow specified procedures in order to properly submit
any business before a stockholder meeting.
These provisions are designed to reduce the vulnerability of McAfee.com to
an unsolicited acquisition proposal and, accordingly, could discourage potential
acquisition proposals and could delay or prevent a change in control of
McAfee.com. These provisions are also intended to discourage tactics that may be
used in proxy fights but could, however, have the effect of discouraging others
from making tender offers for our shares and, consequently, may also inhibit
fluctuations in the market price for our shares that could result from actual or
rumored takeover attempts. These provisions may also have the effect of
preventing changes in our management. See "Risk Factors -- Risks Related to This
Offering -- Provisions in our certificate of incorporation and bylaws and
Delaware law and our relationship with Network Associates may discourage
takeover attempts."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Boston EquiServe.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our Class A common
stock. Future sales of substantial amounts of Class A common stock, including
shares issued upon exercise of outstanding options, in the public market could
adversely affect prevailing market prices. Furthermore, as described below,
36,000,000 shares of Class B common stock currently outstanding will be
available for sale after the expiration of contractual restrictions on resale
with us and/or the underwriters. The shares of Class B common stock held by
Network Associates will automatically convert into shares of Class A common
stock upon transfer by Network Associates to a third party. Sales of substantial
amounts of our Class A common stock in the public market after contractual
restrictions lapse could adversely affect the prevailing market price and our
ability to raise capital in the future.
Upon completion of this offering, we will have outstanding shares
of common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options or warrants. Of these shares, the
shares of Class A common stock sold in this offering will be freely
tradable without restriction under the Securities Act unless purchased by our
"affiliates." Based on shares outstanding as of August 31, 1999, the remaining
shares will become eligible for public sale as follows:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER
OF SHARES
ELIGIBLE
FOR FUTURE
DATE SALE COMMENT
---- ----------- -------
<S> <C> <C>
Date of this prospectus.............. 0
181 days after the date of this
prospectus......................... 36,000,000 Lock-up released. These shares may be
sold under Rule 144.
</TABLE>
LOCK-UP AGREEMENTS WITH THE UNDERWRITERS
Network Associates, currently our sole stockholder, and each of the
individuals holding options that will be vested within the 180-day period after
the date of this prospectus, have signed lock-up agreements under which they
agreed not to sell, transfer or dispose of, directly or indirectly, any shares
of common stock or any securities convertible into or exercisable or
exchangeable for shares of common stock without the prior consent of Morgan
Stanley & Co. Incorporated for a period of 180 days after the date of this
prospectus.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of: 1% of
the number of shares of our common stock then outstanding, which will equal
approximately shares immediately after this offering; or the average
weekly trading volume of the common stock on the Nasdaq National Market during
the four calendar weeks preceding the filing of a notice on Form 144 with
respect to the sale. Sales under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of current public
information about McAfee.com.
RULE 144(k)
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, is
70
<PAGE> 72
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, 144(k) shares may be sold immediately upon the
completion of this offering.
RULE 701
Any employee, officer or director of, or consultant to, McAfee.com or
Network Associates who purchased his or her shares under a written compensatory
plan or contract may be entitled to sell their shares in reliance on Rule 701.
Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell these shares in reliance on Rule 144
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. Under this rule, all holders of
Rule 701 shares are required to wait until 90 days after the date of this
prospectus before selling those shares. However, because all shares that we have
issued under Rule 701 are subject to lock-up agreements, they will only become
eligible for sale when the 180-day lock-up agreements expire. As a result, they
may be sold 90 days after the offering only if the holder obtains the prior
written consent of Morgan Stanley & Co. Incorporated.
REGISTRATION RIGHTS
Upon completion of this offering, Network Associates or its transferees
will be entitled to rights with respect to the registration of the shares of
Class A common stock held by it under the Securities Act. See "Related Party
Transactions -- Intercompany Agreements -- Registration Rights Agreement." After
these shares are registered, they will be freely tradable without restriction
under the Securities Act.
STOCK OPTIONS
Immediately after this offering, we intend to file a registration
statement, on Form S-8 under the Securities Act, to register shares of Class A
common stock which have been reserved for issuance under our stock option and
employee stock purchase plans. As of September 22, 1999, options to purchase
4,539,850 shares of our Class A common stock were issued and outstanding.
This registration statement is expected to be filed and become effective as
soon as practicable after the effective date of this offering. Accordingly,
shares registered under this registration statement will, subject to vesting
provisions and Rule 144 volume limitations applicable to our affiliates, be
available for sale in the open market immediately after the expiration of the
180-day lock-up agreements.
71
<PAGE> 73
UNDERWRITERS
Under the terms and subject to the conditions contained in the underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, BancBoston Robertson Stephens Inc. and
Hambrecht & Quist LLC are acting as representatives, have severally agreed to
purchase, and we have agreed to sell to them, severally, the respective number
of shares of Class A common stock set forth opposite the names of the
underwriters below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
BancBoston Robertson Stephens Inc...........................
Hambrecht & Quist LLC.......................................
--------
Total.....................................................
========
</TABLE>
The underwriters are offering the shares subject to their acceptance of the
shares from us and subject to prior sale. The underwriting agreement provides
that the obligations of the several underwriters to pay for and accept delivery
of the shares of Class A common stock offered hereby are subject to the approval
of certain legal matters by their counsel and to certain other conditions. The
underwriters are obligated to take and pay for all of the shares of Class A
common stock offered by this prospectus, other than those covered by the
over-allotment option described below, if any of the shares are taken.
The underwriters initially propose to offer part of the shares of Class A
common stock directly to the public at the public offering price set forth on
the cover page of this prospectus and part to certain dealers at a price that
represents a concession not in excess of $ a share under the public
offering price. Any underwriters may allow, and such dealers may re-allow, a
concession not in excess of $ a share to other underwriters or to
certain other dealers. After the initial offering of the shares of Class A
common stock, the offering price and other selling terms may from time to time
be varied by the representatives of the underwriters.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of
additional shares of Class A common stock at the public offering price set forth
on the cover page of this prospectus, less underwriting discounts and
commissions. The underwriters may exercise this option solely for the purpose of
covering over-allotments, if any, made in connection with this offering of the
shares of Class A common stock. To the extent this option is exercised, each
underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of the additional shares of common stock as
the number set forth next to that underwriter's name in the preceding table
bears to the total number of shares of Class A common stock set forth next to
the names of all underwriters in the preceding table. If the underwriters'
over-allotment option is exercised in full, the total price to public would be
$ , the total underwriters' discounts and commissions would be
$ , and the total proceeds to us would be $ before deducting
estimated offering expenses of $ .
At our request, the underwriters have reserved up to shares
of Class A common stock to be sold in the offering for sale, at the public
offering price, to our directors, officers, employees and business associates
and related persons. The number of shares of Class A common stock available for
sale to the general public will be reduced to the extent these individuals and
entities purchase the reserved shares. These shares will also be subject to the
180-day lockup period described in the next paragraph. Any reserved shares which
are not so purchased will be offered by the underwriters to the general public
on the same basis as the other shares offered hereby.
72
<PAGE> 74
We, Network Associates, currently our sole stockholder, and each of the
individuals holding options to acquire shares of our Class A common stock that
will be vested within the 180-day period after the date of this prospectus, have
each agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the underwriters, during the period ending 180 days
after the date of this prospectus, we or they will not:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, whether
the shares or any of those securities are then owned by that person or
are later acquired directly from us; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock, whether any transaction described above is to be settled by
delivery of common stock or such other securities, in cash or otherwise.
The restrictions described in the previous paragraph do not apply to:
- the sale to the underwriters of the shares of Class A common stock under
the underwriting agreement;
- the issuance by McAfee.com of shares of Class A common stock upon the
exercise of an option or a warrant or the conversion of a security
outstanding on the date of this prospectus which is described in the
prospectus;
- transactions by any person other than McAfee.com relating to shares of
common stock or other securities acquired in open market transactions
after the completion of the offering of the shares of common stock;
- gifts and transfer by will or intestacy;
- transfers to members, partners, affiliates or immediate family or
transfers to a trust for the benefit of the transferor or the
transferor's immediate family; and
- issuances of shares of common stock or options to purchase shares of
common stock under our employee benefit plans as in existence on the date
of the prospectus and consistent with past practices.
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Class A common stock offered by them.
We have submitted an application to have our common stock approved for
quotation on the Nasdaq National Market under the symbol: "MCAF."
In order to facilitate the offering of the Class A common stock, the
underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Class A common stock. Specifically, the underwriters may
over-allot in connection with the offering, creating a short position in the
Class A common stock for their own account. In addition, to cover
over-allotments or to stabilize the price of the Class A common stock, the
underwriters may bid for, and purchase, shares of common stock in the open
market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an underwriter or a dealer for distributing the Class A common stock
in the offering if the syndicate repurchases previously distributed shares of
Class A common stock in transactions to cover syndicate short positions or in
stabilization transactions. Any of these activities may stabilize or maintain
the market price of the Class A common stock above independent market levels.
The underwriters are not required to engage in these activities and may end any
of these activities at any time.
73
<PAGE> 75
We and Network Associates, on the one hand, and the underwriters, on the
other hand, have agreed to indemnify each other against liabilities, including
liabilities under the Securities Act.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the shares of
common stock. Consequently, the public offering price for the shares of common
stock will be determined by negotiations between McAfee.com and the
representatives of the underwriters. Among the factors to be considered in
determining the public offering price will be our record of operations, our
current financial position and future prospects, the experience of our
management, sales, earnings and certain of our other financial and operating
information in recent periods, the price-earnings ratios, price-sales ratios,
market prices of securities and certain financial and operating information of
companies engaged in activities similar to ours.
LEGAL MATTERS
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California, will pass upon the validity of the issuance of the shares of Class A
common stock offered by this prospectus. Gray Cary Ware & Freidenrich LLP will
pass upon certain legal matters in connection with this offering for the
Underwriters. Wilson Sonsini Goodrich & Rosati, Professional Corporation is
general outside counsel to Networks Associates, Inc.
EXPERTS
The financial statements of McAfee.com Corporation as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31, 1998
included in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the common stock. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedules to the registration statement. For further information
with respect to us and the common stock, we refer you to the registration
statement and the exhibits and schedules filed as a part of the registration
statement. Statements contained in this prospectus concerning the contents of
any contract or any other document are not necessarily complete. If a contract
or document has been filed as an exhibit to the registration statement, we refer
you to the copy of the contract or document that has been filed. Each statement
in this prospectus relating to a contract or document filed as an exhibit is
qualified in all respects by the filed exhibit. The registration statement,
including exhibits and schedules, may be inspected without charge at the SEC's
principal office in Washington, D.C., and copies of all or any part of it may be
obtained from that office after payment of fees prescribed by the SEC. The SEC
maintains a web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC at
http://www.sec.gov.
We intend to provide our stockholders with annual reports containing
consolidated financial statements audited by an independent public accounting
firm and quarterly reports containing unaudited consolidated financial data for
the first three quarters of each year.
74
<PAGE> 76
MCAFEE.COM CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets December 31, 1997 and 1998 and June 30, 1999
(unaudited)............................................... F-3
Statements of Operations
Years ended December 31, 1996, 1997 and 1998 and each of
the six month periods ended June 30, 1998 and 1999
(unaudited)............................................ F-4
Statements of Stockholder's Deficit
Years ended December 31, 1996, 1997 and 1998 and the six
months ended June 30, 1999 (unaudited)................. F-5
Statements of Cash Flows
Years ended December 31, 1996, 1997 and 1998 and each of
the six month periods ended June 30, 1998 and 1999
(unaudited)............................................ F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 77
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholder
McAfee.com Corporation
In our opinion, the accompanying balance sheets and the related statements
of operations, stockholder's equity, and cash flows present fairly, in all
material respects, the financial position of McAfee.com Corporation, a wholly
owned subsidiary of Networks Associates, Inc. ("NAI"), at December 31, 1997 and
1998 and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
August 20, 1999
F-2
<PAGE> 78
MCAFEE.COM CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1997 1998 1999
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ -- $ -- $ --
Accounts receivable, less sales returns reserve of $100 at
December 31, 1998 and June 30, 1999.................... -- 1,087 1,519
Receivable from NAI....................................... -- 1,286 10,048
------- ------- --------
Total current assets................................... -- 2,373 11,567
Fixed assets, net........................................... 21 65 2,449
------- ------- --------
Total assets........................................... $ 21 $ 2,438 $ 14,016
======= ======= ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable.......................................... $ -- $ 51 $ 476
Accrued liabilities....................................... 17 1,130 5,820
Deferred revenue.......................................... 2,976 6,388 19,214
Payable to NAI............................................ 275 -- --
------- ------- --------
Total liabilities...................................... 3,268 7,569 25,510
------- ------- --------
Commitments and contingencies (Note 8)
Contribution from NAI....................................... 51 -- --
Preferred Stock, par value $.001, Authorized 5,000,000
shares, none outstanding
Common Stock, Class A; par value $.001, Authorized
100,000,000 shares, none outstanding
Common Stock, Class B; par value $.001. Authorized
65,000,000; no shares issued and outstanding at December
31, 1997 and 36,000,000 shares issued and outstanding at
December 31, 1998 and June 30, 1999....................... -- 36 36
Additional paid-in capital.................................. -- 124 4,423
Accumulated deficit......................................... (3,298) (5,291) (15,953)
------- ------- --------
Stockholder's deficit..................................... (3,247) (5,131) (11,494)
------- ------- --------
Total liabilities and stockholder's deficit............ $ 21 $ 2,438 $ 14,016
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 79
MCAFEE.COM CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue..................................... $ 539 $ 2,530 $ 6,292 $ 2,586 $ 9,332
------- ------- ------- ------- --------
Cost of revenue:
Product costs............................. 53 142 730 55 1,781
Technology costs.......................... 206 1,960 2,975 1,282 3,352
License fees payable to NAI............... -- -- -- -- 1,101
------- ------- ------- ------- --------
Total cost of revenue.................. 259 2,102 3,705 1,337 6,234
------- ------- ------- ------- --------
Operating expenses:
Research and development.................. 287 326 2,661 653 2,703
Marketing and sales....................... 1,438 1,469 1,152 38 7,453
General and administrative................ 345 141 767 341 1,978
Stock-based compensation.................. -- -- -- -- 1,626
------- ------- ------- ------- --------
Total operating expenses............... 2,070 1,936 4,580 1,032 13,760
------- ------- ------- ------- --------
Income (loss) from operations............... (1,790) (1,508) (1,993) 217 (10,662)
------- ------- ------- ------- --------
Net income (loss)........................... $(1,790) $(1,508) $(1,993) $ 217 $(10,662)
======= ======= ======= ======= ========
Net income (loss) per share, basic and
diluted................................... $ (.05) $ (.04) $ (.06) $ .01 $ (.30)
Shares used in per share calculation........ 36,000 36,000 36,000 36,000 36,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 80
MCAFEE.COM CORPORATION
STATEMENTS OF STOCKHOLDER'S DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- CONTRIBUTION PAID-IN ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT FROM NAI CAPITAL DEFICIT DEFICIT
------ ------ ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996.............. -- $-- $ -- $ -- $ -- $ --
Contribution of fixed assets from NAI... -- -- 51 -- -- 51
Net loss for the period................. -- -- -- -- (1,790) (1,790)
------ --- ------ ------ -------- --------
Balance at December 31, 1996............ -- -- 51 -- (1,790) (1,739)
Net loss for the period................. -- -- -- -- (1,508) (1,508)
------ --- ------ ------ -------- --------
Balance at December 31, 1997............ -- -- 51 -- (3,298) (3,247)
Contribution of fixed assets from NAI... -- -- 73 -- -- 73
Stock issued to NAI..................... 36,000 36 (124) 124 -- 36
Net loss for the period................. -- -- -- -- (1,993) (1,993)
------ --- ------ ------ -------- --------
Balance at December 31, 1998............ 36,000 36 -- 124 (5,291) (5,131)
Contribution of fixed assets from NAI... -- -- 2,673 -- 2,673
Stock-based compensation................ -- -- -- 1,626 -- 1,626
Net loss for the period................. -- -- -- -- (10,662) (10,662)
------ --- ------ ------ -------- --------
Balance at June 30, 1999 (unaudited).... 36,000 $36 $ -- $4,423 $(15,953) $(11,494)
====== === ====== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 81
MCAFEE.COM CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................... $(1,790) $(1,508) $(1,993) $ 217 $(10,662)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation........................... 13 17 29 12 290
Stock-based compensation............... -- -- -- -- 1,626
Changes in assets and liabilities:
Accounts receivable.................. -- -- (1,087) -- (432)
Accounts payable and accrued
liabilities....................... 100 (83) 1,164 (5) 5,114
Deferred revenue..................... 1,003 1,973 3,412 1,005 12,826
------- ------- ------- ------- --------
Net cash provided by (used in)
operating activities.............. (674) 399 1,525 1,229 8,762
Cash flows from financing activities:
Change in amount due to (from) NAI........ 674 (399) (1,561) (1,229) (8,762)
Common stock issued to NAI................ -- -- 36 -- --
------- ------- ------- ------- --------
Net cash (used in) provided by
financing activities.............. 674 (399) (1,525) (1,229) (8,762)
------- ------- ------- ------- --------
Net increase in cash........................ -- -- -- -- --
Cash at beginning of year................... -- -- -- -- --
------- ------- ------- ------- --------
Cash at end of year......................... $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= ========
Non cash investing and financing activities
Contribution of fixed assets from NAI..... $ 51 $ -- $ 73 $ 37 $ 2,673
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 82
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
1. DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Company
McAfee.com (the "Company"), a wholly owned subsidiary of Networks
Associates, Inc. ("NAI"), a publicly traded corporation, was incorporated in
December 1998, and commenced operations as a separate legal entity in January
1999.
The Company is an Internet destination site which allows users to secure,
repair, update, upgrade and manage their personal computers (PCs) over the
Internet. The Company's electronic commerce activities include, software
licensing, sponsorship and co-hosting, and advertising. The Company's objective
is to become the leading and trusted online destination where consumers secure,
repair, update, upgrade and manage their PCs and other Internet access devices.
Basis of Presentation
These financial statements have been derived from the historical books and
records of NAI. The balance sheet includes all assets and liabilities directly
attributable to the Company which are derived from historical cost information
of NAI. NAI has contributed certain fixed assets to the Company, which have been
recorded in the financial statements of the Company as a permanent capital
contribution from NAI. The statement of operations includes all revenues and
expenses directly attributable to the Company including charges for shared
facilities, functions and services used by the Company and provided by NAI.
Certain expenses have been allocated based on NAI management's estimate of the
cost of services provided by NAI. Such expenses include research and development
expenses, marketing and sales expenses and general and administrative expenses.
Such allocations have been based on either a direct expense pass-through or
percentage of total expenses for the services provided, based on headcount,
which is considered to be the most appropriate allocation method for the
services incurred. These charges are believed by the Company to be based on
reasonable assumptions, however these charges are not necessarily indicative of
the expenses that would have been incurred had the Company operated as a
separate entity during these periods. Commencing on January 1, 1999, the Company
has recorded intercompany charges from NAI for management services provided by
NAI and technology license fees due to NAI, based on intercompany agreements
with NAI (see Note 4). The charges for management services are based on direct
expenses attributable to the Company as well as a percentage of NAI's total
expenses for shared facilities, functions and services used by the business,
plus 10% of the cost. The allocation of these expenses is based on headcount.
Interim Financial Information
The unaudited financial information as of June 30, 1999 and for the six
months ended June 30, 1998 and 1999 has been prepared on the same basis as the
annual financial statements and, in the opinion of the Company's management,
contains all adjustments (consisting of normal recurring adjustments) necessary
for a fair presentation. Operating results for any interim period are not
necessarily indicative of results to be expected for the entire year.
F-7
<PAGE> 83
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
Certain Risks and Concentrations
The Company is subject to certain risks and uncertainties common to growing
technology-based companies, including rapid technological change, growth and
commercial acceptance of the Internet, dependence on third party technology, new
service introductions and other activities of competitors, dependence on key
personnel, international expansion and limited operating history.
The Company's product revenues are concentrated in the computer software
industry which is highly competitive and rapidly changing. Significant
technological changes in the industry or customer requirements, changes in
customer buying behavior, or the emergence of competitive products with new
capabilities or technologies could adversely affect operating results. Also, a
significant portion of the Company's revenues are derived from sales fulfilled
through one company, Beyond.com. Significant changes in operations or financial
stability of Beyond.com could adversely affect operating results.
The Company's products are substantially based on technology which is
licensed from NAI. Any significant changes in operations or financial stability
of NAI could adversely affect operating results.
Revenue Recognition
Revenue from product licenses is recognized when persuasive evidence of an
arrangement exists, the fee is fixed and determinable, collectibility is
probable, and delivery and acceptance of the software products have occurred.
When contracts contain multiple elements wherein vendor specific objective
evidence exists for all undelivered elements, the Company recognizes revenue for
the delivered elements and defers revenue for the undelivered elements until the
remaining obligations have been satisfied. Any maintenance included in these
arrangements is recognized ratably over the term of the agreement. For contracts
containing multiple elements wherein vendor specific objective evidence does not
exist for all undelivered elements, revenue is deferred until remaining
obligations have been satisfied, which typically do not extend beyond twelve
months. Maintenance revenues are recognized ratably over the term of the
maintenance contract, which is generally twelve months. Allowances for estimated
returns are provided upon product delivery.
Revenue from fees for providing sponsorships, co-hosting arrangements and
software subscriptions for our hosted applications is deferred at the time of
the transaction and is recognized ratably over the term of the arrangements or
subscriptions.
Revenue from banner advertising and other advertising arrangements is
recognized as advertisement impressions are delivered.
F-8
<PAGE> 84
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
Research and Development
Research and development expenditures prior to establishing technological
feasibility are charged to operations as incurred. Under the Company's
development process, technological feasibility is established on completing a
working model. Subsequent expenses for the Company have not been significant and
all software development expenses have therefore been expensed.
Advertising Expenses
Advertising production expenses are expensed as incurred. Other advertising
expenses are expensed as the advertisement is published or broadcast. Total
advertising expenses were none, $19,000 and $46,000 for the years ended December
31, 1996, 1997, 1998, respectively, and none and $2.8 million for the six month
periods ended June 30, 1998 and 1999, respectively.
Cash
NAI maintains the cash balance of the Company. Cash received from
operations of the Company is shown as a receivable from NAI. Cash used in
operations is deducted from this receivable balance.
Fixed Assets
Fixed assets are presented at cost less accumulated depreciation.
Depreciation and amortization of fixed assets is computed using the
straight-line method over the estimated useful lives of the assets (2 to 5
years).
Impairment of Long-Lived Assets
The Company reviews for the impairment of long-lived assets whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposition is less than its carrying amount. The Company has not
identified any such impairment losses.
Fair Value of Financial Instruments
Carrying amounts of the Company's financial instruments including cash,
amounts due from NAI, accounts receivable, accounts payable and accrued
liabilities approximate fair value due to their short maturities.
Net Income (Loss) Per Share
Basic net income (loss) per share is computed using the weighted average
common shares outstanding during the period. Diluted net income per share is
computed using the weighted average common shares and common equivalent shares
outstanding during the period.
The Company issued Common Stock in December 1998 and commenced operations
as a separate legal entity in January 1999. Accordingly, earnings per share have
been presented on a retroactive basis, for all periods.
F-9
<PAGE> 85
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
Income Taxes
The Company is not a separate taxable entity for federal, state or local
income tax purposes and its operations are included in the tax returns of NAI.
The Company calculates its income taxes under the separate return method and
accounts for income taxes in accordance with Financial Accounting Standards
Board Statement 109 (SFAS 109), "Accounting for Income Taxes." Deferred tax
assets and liabilities are recognized for the expected future tax consequences
of temporary differences between the tax basis of assets and liabilities and
their financial statement reported amounts. The Company records a valuation
allowance against deferred tax assets when it is more likely than not that such
assets will not be realized.
Stock-based Compensation
As permitted by Financial Accounting Standards Board Statement 123 (SFAS
123), "Accounting for Stock-Based Compensation," the Company accounts for
employee stock-based compensation in accordance with Accounting Principles Board
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", and
related interpretations in accounting for its stock based compensation plans.
Stock compensation related to non-employees is based on the fair value of the
related stock or options in accordance with SFAS 123 and its interpretations.
Comprehensive Income
The Company has adopted Statement of Accounting Standards No. 130 (SFAS
130), "Reporting Comprehensive Income," which establishes standards for
reporting comprehensive income and its components in the financial statements.
To date, the Company has had no transactions that are required to be included in
comprehensive income.
Segment Information
The Company identifies its operating segments based on business activities,
management responsibility and geographical location. The Company has organized
its operations into a single operating segment, providing delivery of
personalized e-commerce offerings and local content. Further, the Company
derives the significant majority of its revenues from operations in the United
States.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In October 1997, March 1998 and December 1998, the American Institute of
Certified Public Accountants ("AICPA") issued SOP 97-2, "Software Revenue
Recognition," SOP 98-4, "Deferral of the Effective Date of a Provision of SOP
97-2, 'Software Revenue Recognition' ", and SOP 98-9, "Modification of SOP 97-2,
'Software Revenue Recognition' with Respect to Certain Transactions"
(collectively, "SOP 97-2"). SOP 97-2 provides guidance on recognizing revenue on
software transactions and superseded SOP 91-1. The adoption of SOP 97-2 did not
have a significant impact on the Company's results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires the Company to recognize
all derivatives on the balance sheet at fair value.
F-10
<PAGE> 86
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
Derivatives that are not hedges must be adjusted to fair value through net
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of the derivative are either offset against the change
in fair value of assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. SFAS 133 is effective for years beginning
after June 15, 2000. The Company does not expect this pronouncement to
materially impact the Company's results of operations.
In February 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position No. 98-1 (SOP 98-1), "Accounting for the Costs of
Computer Software Developed of Obtained for Internal Use." SOP 98-1 establishes
the accounting for costs of software products developed or purchased for
internal use, including when such costs should be capitalized. Adoption of this
pronouncement, which is effective for fiscal 1999, did not materially impact the
Company's results of operations.
In April 1998, the AcSEC issued Statement of Position No. 98-5 (SOP 98-5),
"Reporting on the Costs of Start-Up Activities." SOP 98-5 requires that the
costs of start-up activities, including organizational costs, are expensed as
incurred. Adoption of this pronouncement, which is effective for 1999, did not
materially impact the Company's results of operations.
3. BALANCE SHEET DETAIL (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1997 1998 1999
---- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Fixed assets:
Computers and equipment................................ $ 51 $ 124 $2,666
Furniture and fixtures................................. -- -- 131
---- ------ ------
51 124 2,797
---- ------ ------
Less accumulated depreciation and amortization......... (30) (59) (348)
---- ------ ------
$ 21 $ 65 $2,449
==== ====== ======
Accrued liabilities:
Accrued compensation................................... $ 17 $ 87 $ 143
Accrued legal and accounting........................... -- 400 1,160
Accrued taxes.......................................... -- -- 471
Accrued marketing...................................... -- 31 2,854
Accrued outside services............................... -- 523 617
Other accrued expenses................................. -- 89 575
---- ------ ------
$ 17 $1,130 $5,820
==== ====== ======
</TABLE>
4. RELATED PARTY TRANSACTIONS
The Company has entered into certain agreements with NAI for the purpose of
defining their ongoing relationship. These agreements were developed in the
context of a parent/subsidiary relationship
F-11
<PAGE> 87
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
and therefore are not the result of arms-length negotiations between independent
parties. Although these agreements or the transactions contemplated by these
agreements may not have been effected on terms at least as favorable to the
Company as could have been obtained from unaffiliated third parties, the Company
believes that these agreements taken as a whole are fair to both parties and
that the amount of the expenses contemplated by the agreements would not be
materially different if the Company operated on a stand-alone basis.
Corporate Management Services Agreement. On January 1, 1999, the Company
entered into a Corporate Management Services Agreement with NAI under which NAI
provides the Company certain administrative services. Under this agreement, NAI
provides to the Company services relating to tax, accounting, insurance,
employee benefits administration, corporate record-keeping, payroll, information
technology infrastructure, and facilities management. In addition, the Company
may request certain additional services to be provided from time-to-time in the
future, with the fee for such additional services subject to negotiation between
the parties. The initial monthly fee that the Company is required to pay for
these services under the agreement is a portion of the costs to NAI plus a 10%
mark-up. The Company's share of such costs is calculated based on headcount.
During the six month period to June 30, 1999, NAI charged the Company $1,341,000
under this agreement. For the fiscal periods prior to 1999, general and
administrative expenses allocated to the Company were based on a similar
calculation.
The corporate management services agreement may be terminated either by the
Company upon 30 days notice, or by NAI when it ceases to own a majority of the
Company's outstanding voting stock. Following a termination of this agreement,
the Company may be unable to secure these services from others on acceptable
terms. If the Company is unsuccessful in obtaining acceptable provision of these
services upon termination of the corporate management services agreement, the
Company's future financial performance could be adversely affected.
Cross License Agreement. The Company entered into a technology cross
license agreement with NAI through one of NAI's wholly-owned subsidiaries. Under
this agreement, NAI has granted the Company worldwide non-exclusive patent
licenses and exclusive copyright licenses for the sale or licensing of software
products or software services to certain OEMs and end users solely via the
Internet. Eligible end users include only single-node, individual consumers. In
consideration for the license and rights granted under this license, the Company
is required to pay NAI a royalty on revenues from related product and
subscription sales, initially at a rate of 20% commencing on January 1, 1999 and
declining 1.625% per quarter until the rate is 7% in the quarter beginning
January 1, 2001, and remaining at 7% thereafter. Also under this agreement, the
Company has granted NAI a non-exclusive patent licenses and exclusive copyright
licenses for the sale of products to enterprise customers through any method of
distribution including the Internet and to end users through any method
excluding the Internet. In consideration for the rights granted under this
license, NAI is required to pay the Company a royalty of $250,000 per quarter.
Under this cross technology agreement, NAI will provide end user support to the
Company's customers. Charges for such support will be equal to a portion of the
costs to NAI plus a 10% markup.
During the six months ended June 30, 1999, the Company was charged
$1,101,000 and $2,232,000 for royalties and support services, respectively. Had
the technology agreement been in effect in prior years, royalties, exclusive of
the royalty payable from NAI, would have been $50,000, $478,000, and $1.2
million for 1996, 1997 and 1998, respectively.
F-12
<PAGE> 88
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
In the event that the Company does not undergo an initial public offering
prior to December 31, 2000, NAI has the right to terminate this agreement and
all licenses granted under it.
Asset Contribution and Receivables Settlement Agreement. The Company
entered into an asset contribution agreement with NAI effective as of January 1,
1999 that transfers ownership of certain assets to the Company. Among the assets
transferred to the Company are: a number of co-hosting and technology agreements
to which NAI is a party; revenues from advertising and sponsorship agreements
involving the Company; ownership rights in 3 patent applications; computers and
Internet infrastructure hardware; and any other assets which both NAI and the
Company's board of directors agree to transfer at a future date. No liabilities
were transferred to the Company, except for those directly resulting from the
assets transferred. NAI will settle the receivable/payable amount in cash,
without interest, on a quarterly basis commencing on September 30, 1999.
Revolving Loan Agreement. In January 1999, the Company entered into a
revolving loan agreement with NAI. Under the agreement, NAI has agreed to make
available to the Company up to $30 million in cash as a revolving loan. The
interest rate under this revolving loan is equal to the three-month LIBOR rate.
NAI has the option of having the Company repay the entire principal and interest
then outstanding on the date that is 30 days after the closing of the public
offering covered by this prospectus. Alternatively, if NAI does not request
repayment prior to that time, the revolving loan is repayable in full on January
1, 2001, the termination date of the agreement.
Tax Sharing Agreement. The Company and NAI have entered into a tax-sharing
agreement under which the Company calculates income taxes on a separate return
basis. The Company will be included in NAI's consolidated group for federal
income tax purposes for so long as NAI beneficially owns at least 80% of the
total voting power and the value of the outstanding common stock. Each member of
a consolidated group is jointly and severally liable for the federal income tax
liability of each other member of the consolidated group. Accordingly, although
the tax-sharing agreement allocates tax liabilities between the Company and NAI,
during the period in which the Company is included in NAI's consolidated group,
the Company could be liable in the event that any federal tax liability is
incurred, but not discharged, by any other members of NAI's consolidated group.
Under the tax sharing agreement, NAI and each other member has agreed to
indemnify the Company if the Company is required to pay any tax liability amount
in excess of its hypothetical separate income tax liability, provided the
Company is not in default in its obligation to pay such hypothetical separate
income tax liability to NAI.
The tax sharing agreement will terminate if the Company is no longer
eligible to join NAI in the filing of a consolidated federal income tax return.
In the event of such termination, any net operating losses or other carryforward
amounts would not be available to the Company upon departure from the group.
Under the tax sharing agreement, the Company will not be reimbursed for any such
loss of tax benefits.
Currently we have entered into one statement of work under which the
Company will maintain NAI's website. For this service the Company charges NAI a
fee equal to 10% of the Company's total technology costs plus a 10% mark-up.
During the six months ended June 30, 1999 the charge to NAI was $414,000. This
amount has been offset against technology costs.
F-13
<PAGE> 89
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
Joint Cooperation Agreement. The Company has entered into a Joint
Cooperation and Master Services Agreement with NAI which governs the provision
of technology services among the parties. Under this agreement, NAI's anti-virus
emergency response team (AVERT) will provide us with research and solutions for
virus events. The agreement also contains standard terms and conditions
governing the provision of technology services from one party to the other under
statements of work that may be negotiated from time to time. Currently we have
entered into one such statement of work under which we provide Network
Associates the infrastructure and technical support services for Network
Associates' web site (www.nai.com). Network Associates pays us a fee for these
services in an amount equal to ten percent of our total quarterly technology
costs plus a ten percent service charge. We are obligated to provide these
services until December 31, 2000 under this statement of work.
Indemnification and Voting Agreement. The Company has entered into an
indemnification and voting agreement with NAI which will become effective upon
consummation of this offering. Except under certain specified circumstances, NAI
will indemnify the Company for all losses related to any third party claims
relating to events or circumstances arising out of actions or inaction of NAI,
including its subsidiaries and officers and directors, on or prior to the
completion of this offering. Additionally, for so long as NAI owns at least 20%
of the Company's outstanding voting power, it will vote its shares of the
Company's common stock in favor of the election of two independent directors.
Registration Rights Agreement. The Company has entered into a registration
rights agreement with NAI that entitles NAI to include its shares of Company
common stock in any future registration of common stock made by the Company,
other than any registration statement relating to an acquisition or a stock
option plan. In addition, at any time after six months after this offering, NAI
or certain transferees can request that the Company file a registration
statement so they can publicly sell their shares. The Company has agreed
pursuant to the terms of this registration rights agreement to pay all costs and
expenses, other than underwriting discounts and commissions, related to shares
to be sold by NAI or certain transferees in connection with any such
registration.
5. EMPLOYEE BENEFIT PLANS
401(k) and Profit Sharing Plan
NAI has a 401(k) Savings Plan which covers substantially all Company
full-time employees. Participants may make tax-deferred contributions of up to
15% of annual compensation (subject to other limitations specified by the
Internal Revenue Code). Administrative and matching expenses, which are charged
to the Company by NAI, have, to date, not been significant.
Employee Stock Purchase Plan
All Company full-time employees are eligible to participate in NAI's 1994
Employee Qualified Stock Purchase Plan. The Plan is comprised of one year
offering periods with exercise dates approximately every six months (beginning
each August and February). Shares are purchased through employees' payroll
deductions at exercise prices equal to 85% of the lesser of the fair market
value of NAI's common stock at either the first day of an offering period or the
last day of such offering period. No participant may purchase more than $25,000
worth of common stock in any one calendar year.
F-14
<PAGE> 90
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
6. STOCKHOLDERS' EQUITY
Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock, par value
$.001 per share. The Company's Board of Directors has authority to provide for
the issuance of the shares of preferred stock in series, to establish from
time-to-time the number of shares to be included in each such series and to fix
the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof, without any
further vote or action by the shareholders. As of June 30, 1999 no shares of
preferred stock have been issued.
Common Stock
The Company has authorized 100,000,000 shares of Class A common stock, par
value $.001 per share. The Company also has authorized 65,000,000 shares of
Class B common stock, par value $.001 per share. As of June 30, 1999, 36,000,000
shares of Class B common stock have been issued to NAI, and no shares of Class A
shares have been issued.
Class A and B shares are identical in all respects except for voting rights
and certain conversion rights. Class A shares are entitled to one vote per share
and Class B shares are entitled to three votes per share. Class A common stock
is not convertible. Class B common stock is convertible, in whole or in part, at
any time and from time-to-time at the option of the holder, on the basis of one
share of Class A common stock for each share of Class B common stock. Class A
and Class B common stock will be treated as a single class in the event of
liquidation of the Company. Any share of Class B common stock transferred by NAI
will automatically convert into Class A common stock upon transfer.
Stock Option Plans
In January 1999, the Board of Directors approved the 1999 Stock Plan (the
"Plan"), as amended June 19, 1999. Under the Plan, the Company has reserved
8,388,000 shares for issuance to employees, officers, directors and consultants.
The Plan also provides for automatic annual increases to be added at the annual
stockholder's meeting, equal to the lower of: (a) 2.5 million shares of Class A
common stock, (b) 5% of the outstanding shares of all Class A common stock on
that date, or (c) an amount determined by the Company's Board of Directors. The
Plan provides for an option price no less than 100% of the fair market value of
the Company's common stock on the date of grant for incentive stock options
granted to employees and officers (including directors who are also employees)
or 85% of the fair market value on the date of grant for all others. The options
may be exercisable immediately, or over time, generally vest 25% one year after
commencing employment or from date of grant and vest thereafter in monthly
increments over three years. All options under the Plan expire ten years after
grant.
Aggregate activity under stock option plans is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES AVAILABLE ---------------------------
FOR GRANT SHARES PRICE PER SHARE
---------------- --------- ---------------
<S> <C> <C> <C>
Options authorized January 1999................... 8,388,000 -- $ --
Options granted................................... (4,320,000) 4,320,000 3.67
---------- --------- -----
Balance at June 30, 1999 (unaudited).............. 4,068,000 4,320,000 $3.67
========== ========= =====
</TABLE>
F-15
<PAGE> 91
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
Stock-based Compensation Charge
In January 1999, certain officers of NAI were granted options to purchase
3,420,000 shares of the Company's Class A common stock. These options originally
vested over four years. Since these officers are not employees of the Company,
these options are accounted for as variable options. The determination of the
total compensation to be recognized in connection with these grants requires the
remeasurement of the fair value of the options each reporting period until the
options are fully vested. Compensation expense is reflected in the Company's
results of operations over the vesting period. The Company recorded compensation
expense of approximately $1.2 million and $1.6 million for the three and six
months ended June 30, 1999, respectively. On September 22, 1999, with the
agreement of the optionholders, the Company cancelled options for 1,710,000
shares and amended the remaining options to make them fully vested. As a result
of this change, together with a charge for options granted to NAI employees in
September 1999 the Company will record a charge of approximately $6.4 million
during the third quarter of 1999.
7. PROVISION FOR INCOME TAXES
Under the Company's tax sharing agreement with NAI, it calculates its
income taxes on a separate return basis, including utilization of any carryback
or carryforward amounts.
The Company has provided a full valuation allowance against its deferred
tax assets due to the uncertainty that such assets may be realizable.
Significant components of net deferred tax assets at December 31, 1996,
1997 and 1998 consist of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1997 1998
----- ----- -------
<S> <C> <C> <C>
Accrued liabilities and reserves............................ $ -- $ -- $ 264
Net operating loss carryover................................ 681 724 966
----- ----- -------
681 724 1,230
Valuation allowance......................................... (681) (724) (1,230)
----- ----- -------
$ -- $ -- $ --
===== ===== =======
</TABLE>
8. CONTINGENCIES AND LIABILITIES
Litigation
Symantec, Hilgraeve and Trend Micro have each filed suit against NAI with
respect to the anti-virus technology that the Company licenses from NAI. NAI has
indicated that it believes it has valid defenses to these actions and intends to
defend them vigorously. In addition to naming NAI as a defendant in these
litigation matters, claimants may seek to name the Company as a defendant in
related actions and seek damages from the Company. Under the terms of an
indemnification agreement with NAI, subject to certain exemptions, NAI has
agreed to indemnify and defend the Company and hold it harmless from any losses
as a result of these or other intellectual property claims arising out of events
or circumstances occurring prior to the consummation of the Company's initial
public offering. The
F-16
<PAGE> 92
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
litigation process is subject to inherent uncertainties and the Company and/or
NAI may not prevail in these matters, or the Company and/or NAI may be unable to
obtain licenses with respect to any patents or other intellectual property
rights of third parties that may be held valid or infringed upon by the Company
or the Company's products. Uncertainties inherent in the litigation process
involve, among other things, the complexity of the technologies involved,
potentially adverse changes in the law and discovery of facts unfavorable to NAI
or the Company. In addition, any involvement in legal actions regarding the
Company's intellectual property rights could be expensive and could distract
management from the Company's day-to-day operations.
9. NET INCOME (LOSS) PER SHARE
Net income (loss) available to common shareholders and weighted average
shares outstanding are the same for basic and fully diluted earnings per share
calculations for all periods presented.
The fully diluted earnings per share calculation for the six months ended
June 30, 1999 excludes options for 4,320,000 shares as they are anti-dilutive.
10. SUBSEQUENT EVENTS (UNAUDITED)
Reverse Stock Split
On July 28, 1999, the Company effected a 5:3 reverse stock split. All share
and per share information included in these financial statements has been
retroactively adjusted to reflect this reverse stock split.
Director Option Plan
In September 1999, the Company adopted the 1999 Director Option Plan. The
Company has reserved 150,000 shares for issuance under the plan to certain
members of its Board who are not employees of the Company or any affiliated
corporation. Under the plan the number of shares reserved under the plan will
automatically increase at the date of the Annual Stockholder's Meeting by the
number of shares required to restore the reserve available for new options to
150,000 shares. Each outside director will automatically be granted an option to
purchase 40,000 shares of Company common stock on the date at which they become
a director. Each anniversary thereafter, each outside director will
automatically be granted an option to purchase 10,000 shares of Company common
stock. Both the initial and subsequent grants vest at a rate of 25% after one
year and 1/48 each month thereafter.
Employee Stock Purchase Plan
In September 1999 the Company's Board of Directors adopted the Company's
Employee Stock Purchase Plan, (the "1999 Purchase Plan"). A total of 500,000
shares of common stock have been reserved for issuance under the 1999 Purchase
Plan, plus annual increases equal to the lesser of: (i) 1 million shares; (ii)
3% of the outstanding shares on such date; or (iii) an amount determined by the
Board of Directors. As of the date of this prospectus, no shares have been
issued under the 1999 Purchase Plan.
F-17
<PAGE> 93
MCAFEE.COM CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JUNE 30, 1999 AND
THE SIX MONTH PERIODS ENDED JUNE 30, 1998
AND 1999 IS UNAUDITED)
Initial Public Offering
In September 1999, the Board of Directors authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission for an Initial Public Offering of the Company's Class A Common Stock.
F-18
<PAGE> 94
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<PAGE> 95
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<PAGE> 96
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<PAGE> 97
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page on web site]
[Right upper corner]
McAfee STORE [Display of McAfee Store
Best place on the net to buy page on web site]
[Right upper center ]
[Display of McAfee
Bookstore on web site]
McAfee Bookstore
Purchase books on PCs and PC applications
[Center]
[Display of McAfee Comparative McAfee COMPARATIVE
Shopper on web site] SHOPPER
Find the best buys on PCs,
Peripherals and other consumer
devices on the Internet
[Left lower center] McAfee BOOK FINDER
[Display of McAfee Book Finder Intelligent service that recommends
on web site] books for software and applications
installed on your PC
[Left lower corner]
[Display of McAfee Software McAfee SOFTWARE FINDER
Finder on web site] Find software that is relevant to your PC
HELPFUL INTELLIGENT SHOPPING SERVICES FOR YOUR SPECIFIC NEEDS
<PAGE> 98
[MCAFEE.COM LOGO]
<PAGE> 99
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discounts, payable by the Registrant in connection with the sale of
the securities being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq/NMS listing fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 15,985
NASD Filing Fee............................................. 6,250
Nasdaq National Market Listing Fee..........................
Printing Costs.............................................. 150,000
Legal Fees and Expenses..................................... 400,000
Accounting Fees and Expenses................................ 300,000
Blue Sky Fees and Expenses..................................
Transfer Agent and Registrar Fees...........................
Miscellaneous...............................................
Total..................................................... $ ,000,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. Article Nine of our Amended
and Restated Certificate of Incorporation (Exhibit 3.1 hereto) and Article VI of
our current Bylaws (Exhibit 3.2 hereto) provide for indemnification of our
directors, officers, employees and other agents to the maximum extent permitted
by Delaware law. In addition, we have entered into Indemnification Agreements
(Exhibit 10.1 hereto) with our officers and directors. The Underwriting
Agreement (Exhibit 1.1) also provides for cross-indemnification among
McAfee.com, Network Associates and the Underwriters with respect to certain
matters, including matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since our incorporation in December 1998, we have sold and issued the
following securities:
1. In December 1998 in connection with its formation, the Company
issued 36,000,000 shares of Class B common stock to Networks Associates,
Inc. pursuant to an exemption under Section 4(2) of the Securities Act.
2. From inception in December 1998 through September 22, 1999, the
Company granted options to purchase its Class A common stock at exercise
prices ranging from $3.67 to $6.55 per share pursuant to exemptions under
Section 4(2) of the Securities Act and Rule 701 promulgated thereunder, to
directors, officers and employees of McAfee.com and to officers and
employees of Network Associates, Inc. pursuant to the Company's 1999 Stock
Plan.
The recipients of securities in each the above transactions represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates issued in such transactions. All
recipients either received adequate information about McAfee.com or had adequate
access, through their relationships with McAfee.com, to information about us.
II-1
<PAGE> 100
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of
McAfee.com Corporation, as currently in effect.
3.2 Bylaws of McAfee.com Corporation, as currently in effect.
4.1* Specimen Class A common stock certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
10.1 Form of Indemnification Agreement between the Company and
each of its directors and officers.
10.2 1999 Amended and Restated Stock Plan and form of agreements
thereunder.
10.3 1999 Director Option Plan and form of agreements thereunder.
10.4 1999 Employee Stock Purchase Plan and form of agreements
thereunder.
10.5 Corporate Management Services Agreement between the Company
and Networks Associates, Inc., dated as of January 1, 1999.
10.6 Technology Cross License Agreement between McAfee.com and
Networks Associates, Inc., dated as of January 1, 1999.
10.7 Registration Rights Agreement between McAfee.com and
Networks Associates, Inc., dated as of January 1, 1999.
10.8 Asset Contribution and Receivables Settlement Agreement
between McAfee.com and Networks Associates, Inc., dated as
of January 1, 1999.
10.9 Intercompany Revolving Loan Agreement between McAfee.com and
Networks Associates, Inc., dated as of January 1, 1999.
10.10 Tax Sharing Agreement between McAfee.com and Networks
Associates, Inc., dated as of January 1, 1999.
10.11 Indemnification and Voting Agreement between McAfee.com and
Networks Associates, Inc. dated August 20, 1999.
10.12 Joint Cooperation and Master Services Agreement between
McAfee.com and Networks Associates, Inc. dated as of January
1, 1999.
10.13** Amended and Restated Electronic Software Reseller/Web Site
Services Agreement between Beyond.com Corporation and
McAfee.com, dated as of May 17, 1999.
23.1 Consent of PricewaterhouseCoopers LLP
23.2* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included
in Exhibit 5.1)
24.1 Powers of Attorney (included on Page II-4 hereof)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment.
** McAfee.com has requested confidential treatment pursuant to Rule 406 for a
portion of the referenced exhibit and has separately filed such exhibit with
the Commission.
(b) FINANCIAL STATEMENT SCHEDULES.
None
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
II-2
<PAGE> 101
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 102
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Santa
Clara, State of California on September 23, 1999.
By: /s/ SRIVATS SAMPATH
------------------------------------
Srivats Sampath
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Srivats
Sampath and Evan Collins, and each of them, as his attorney-in-fact, with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this registration statement (including post-effective amendments),
and any and all registration statements filed pursuant to Rule 462 under the
Securities Act of 1933, as amended, in connection with or related to the
offering contemplated by this registration statement and its amendments, if any,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorney to any and
all amendments to said registration statement.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on September 23, 1999:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ SRIVATS SAMPATH President, Chief Executive Officer and
- ------------------------------------------- Director (Principal Executive Officer)
Srivats Sampath
/s/ EVAN COLLINS Vice President, Chief Financial Officer and
- ------------------------------------------- Secretary (Principal Financial and
Evan Collins Accounting Officer)
/s/ WILLIAM LARSON Chairman of the Board
- -------------------------------------------
William Larson
/s/ FRANK GILL Director
- -------------------------------------------
Frank Gill
/s/ PRABHAT GOYAL Director
- -------------------------------------------
Prabhat Goyal
/s/ RICHARD SCHELL Director
- -------------------------------------------
Richard Schell
</TABLE>
II-4
<PAGE> 103
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of
McAfee.com Corporation, as currently in effect.
3.2 Bylaws of McAfee.com Corporation, as currently in effect.
4.1* Specimen Class A common stock certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
10.1 Form of Indemnification Agreement between the Company and
each of its directors and officers.
10.2 1999 Amended and Restated Stock Plan and form of agreements
thereunder.
10.3 1999 Director Option Plan and form of agreements thereunder.
10.4 1999 Employee Stock Purchase Plan and form of agreements
thereunder.
10.5 Corporate Management Services Agreement between the Company
and Networks Associates, Inc., dated as of January 1, 1999.
10.6 Technology Cross License Agreement between McAfee.com and
Networks Associates, Inc., dated as of January 1, 1999.
10.7 Registration Rights Agreement between McAfee.com and
Networks Associates, Inc., dated as of January 1, 1999.
10.8 Asset Contribution and Receivables Settlement Agreement
between McAfee.com and Networks Associates, Inc., dated as
of January 1, 1999.
10.9 Intercompany Revolving Loan Agreement between McAfee.com and
Networks Associates, Inc., dated as of January 1, 1999.
10.10 Tax Sharing Agreement between McAfee.com and Networks
Associates, Inc., dated as of January 1, 1999.
10.11 Indemnification and Voting Agreement between McAfee.com and
Networks Associates, Inc. dated August 20, 1999.
10.12 Joint Cooperation and Master Services Agreement between
McAfee.com and Networks Associates, Inc. dated as of January
1, 1999.
10.13** Amended and Restated Electronic Software Reseller/Web Site
Services Agreement between Beyond.com Corporation and
McAfee.com, dated as of May 17, 1999.
23.1 Consent of PricewaterhouseCoopers LLP
23.2* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included
in Exhibit 5.1)
24.1 Powers of Attorney (included on Page II-4 hereof)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment.
** McAfee.com has requested confidential treatment pursuant to Rule 406 for a
portion of the referenced exhibit and has separately filed such exhibit with
the Commission.
<PAGE> 1
EXHIBIT 3.1
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MCAFEE.COM CORPORATION
A DELAWARE CORPORATION
McAfee.com Corporation, a corporation organized and existing under the
laws of the State of Delaware, does hereby certify:
1. The name of the corporation is McAfee.com Corporation (the
"Corporation"). The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on December 23, 1998
and was duly amended on May 19, 1999.
2. The Corporation filed an Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware on June 22,
1999.
3. The restatement herein set forth has been duly approved by the Board
of Directors of the Corporation and by the stockholders of the Corporation by
written consent pursuant to Sections 141, 228 and 242 of the General Corporation
Law of the State of Delaware ("Delaware Law").
4. The restatement herein set forth has been duly adopted pursuant to
Section 245 of Delaware Law. This Amended and Restated Certificate of
Incorporation restates and integrates and further amends the provisions of the
Corporation's Certificate of Incorporation as heretofore restated and amended.
5. The text of the Corporation's Certificate of Incorporation, as
amended to date, is hereby amended and restated to read in its entirety as
follows:
ARTICLE ONE
The name of this corporation is McAfee.com Corporation (the
"Corporation").
ARTICLE TWO
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE THREE
<PAGE> 2
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
ARTICLE FOUR
This Corporation is authorized to issue two classes of stock to be
designated, respectively, Preferred Stock, par value $0.001 per share
("Preferred Stock"), and Common Stock, par value $0.001 per share ("Common
Stock"). The total number of shares that the Corporation shall have the
authority to issue is One Hundred Seventy Million (170,000,000). The total
number of shares of Preferred Stock that the Corporation shall have the
authority to issue is Five Million (5,000,000). The total number of shares of
Common Stock that the Corporation shall have the authority to issue is One
Hundred Sixty Five Million (165,000,000), of which One Hundred Million
(100,000,000) shares shall be designated Common Stock, Class A ("Class A
Common"), and Sixty Five Million (65,000,000) shares shall be designated Common
Stock, Class B ("Class B Common"). Upon the filing of this Second Amended and
Restated Certificate of Incorporation, each five (5) shares of Common Stock
shall be split into and reconstituted as three (3) shares of Common Stock.
Any Preferred Stock not previously designated as to series may be
issued from time to time in one or more series pursuant to a resolution or
resolutions providing for such issue duly adopted by the Board of Directors
(authority to do so being hereby expressly vested in the Board), and such
resolution or resolutions shall also set forth the voting powers, full or
limited or none, of each such series of Preferred Stock and shall fix the
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of each such series of
Preferred Stock. The Board of Directors is authorized to alter the designation,
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of Preferred
Stock, to increase or decrease (but not below the number of shares of any such
series then outstanding) the number of shares of any such series subsequent to
the issue of shares of that series.
ARTICLE FIVE
The shares of Class A Common and Class B Common shall be identical in
all respects and shall have equal rights and privileges, except as expressly set
forth in this Article V.
1. Dividends. Subject to any preferential dividend rights of any series
of Preferred Stock as may then be outstanding, dividends or distributions upon
the Class A Common and Class B Common may be declared by the Board of Directors
and paid by the Board of Directors of the Corporation from time to time in such
amounts as the Board shall determine, out of any source at the time lawfully
available therefor, provided that identical dividends or distributions per share
are declared and paid concurrently upon the shares of each such class; provided
that only dividends, distributions, redemptions or other payments made in shares
of Class A Common or Class B Common or other of the Corporation's equity
securities subordinate to the Class B Preferred shall be
-2-
<PAGE> 3
made in respect of the Class A Common or Class B Common, or any other of the
Corporation's securities junior in right to dividends or assets to the Series B
Preferred.
2. Stock Splits, Combinations and the Like. Neither the Class A Common
nor the Class B Common shall be split, combined or subdivided unless at the same
time there shall be a proportionate split, combination or subdivision of such
other class of Common Stock.
3. Rights Upon Liquidation or Dissolution. Subject to the preferential
rights set forth herein of holders of the Preferred Stock, the holders of the
Class A Common and the holders of the Class B Common shall be entitled to share
ratably in the assets of the Corporation available for distribution to the
holders of Common Stock upon any liquidation or dissolution of the Corporation.
4. Voting. On all matters on which the holders of Common Stock shall be
entitled to vote, each holder of Class A Common shall be entitled to one (1)
vote per share and each holder of Class B Common shall be entitled to three (3)
votes per share.
5. Conversion.
(a) Optional Conversion. Subject to the provisions of this
section 5, each holder of record of Class B Common may, at the sole discretion
and option of such holder, convert any whole number or all of such holder's
shares of Class B Common into fully paid and nonassessable shares of Class A
Common at the rate of one (1) share of Class A Common for each share of Class B
Common surrendered for conversion; provided, however, that such conversion shall
not be effective unless and until any consents or approvals required under
applicable securities laws shall have been obtained.
(b) Automatic Conversion. The outstanding shares of Class B
Common shall automatically be converted into Class A Common at the conversion
rate specified in paragraph (a) above, without further action by the respective
holder or holders of such shares, at the times and in the manner specified as
follows: each share of Class B Common shall automatically convert into Class A
Common immediately upon any sale, conveyance, assignment or other transfer of
such share, whether or not for value, or attempt thereof, by the initial
registered holder thereof or by any subsequent registered holder, other than any
such transfer (1) to a person or entity controlling, controlled by or under
common control with the initial registered holder or (2) to or from an employee
stock ownership plan qualified under Section 4975(e)(7) of the Internal Revenue
Code of 1986, as amended (a "Qualified Plan"); provided that in the event that
any sale, conveyance, assignment or other transfer shall not give rise to
automatic conversion hereunder, then any subsequent transfer or attempt thereof
by the holder (other than any transfer (1) to any person or entity controlling,
controlled by or under common control with the initial registered holder or (2)
to or from a Qualified Plan) shall be subject to automatic conversion upon the
terms and conditions set forth herein.
(c) Mechanics of Conversion. To exercise the optional
conversion privilege set forth herein, the holder of shares of Class B Common
shall surrender the shares to be converted, accompanied by instruments of
transfer satisfactory to the Corporation and the payment in cash of
-3-
<PAGE> 4
any amount required pursuant to subparagraph 5(e) below and sufficient to
transfer the Class B Common being converted to the Corporation free of any
adverse interest, at the principal offices of the Corporation or any of the
offices or agencies maintained for such purpose by the Corporation ("Conversion
Agent") and shall give written notice (by registered or certified mail,
overnight courier or hand delivery) to the Corporation at such Conversion Agent
that the holder elects to convert such shares. Such notice shall also state the
name or names, together with the address or addresses, in which the certificate
or certificate for Class A Common which shall be issuable upon such conversion
shall be issued. As promptly as practicable after the surrender of such shares
of Class B Common as aforesaid, the Corporation shall issue and deliver at such
Conversion Agent to such holder, or on the holder's written order, a certificate
or certificates for the number of full shares of Class A Common issuable upon
the conversion of such shares in accordance with the provisions hereof.
Certificates will be issued for the balance of the shares of Class B Common in
any case in which fewer than all of the shares of Class B Common represented by
a certificate are converted.
Each conversion pursuant to subparagraph 5(b) shall be deemed to have
been effected when the share is transferred or proposed to be transferred. In
each such case the person or persons in whose name or names any certificate of
certificates for Class A Common shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the Class A Common
represented thereby at the effective date of such conversion, unless the stock
transfer books of the Corporation shall be closed on such date, in which event
such conversion shall be deemed to have been effected immediately following the
opening of business on the next day on which the stock transfer books of the
Corporation shall be open. Following any such automatic conversion, the share or
shares of Class B Common so converted shall cease to be outstanding,
notwithstanding the fact that the holder or holders may not have surrendered the
certificate or certificates representing such Class B Common for conversion, and
such certificate or certificates shall thereafter represent solely the right to
receive a certificate or certificates for Class A Common issuable upon
conversion of the Class B Common so converted, upon surrender of such
certificate or certificates to the Corporation or its Conversion Agent, of the
certificate or certificates for Class B Common so converted.
(d) Reservation of Shares. The Corporation shall at all times
reserve and keep available out of the authorized and unissued shares of Class A
Common, solely for the purposes of effecting the conversion of the outstanding
Class B Common, such number of shares of Class A Common as shall from time to
time be sufficient to effect conversion of all outstanding Class B Common.
(e) Payment of Transfer Taxes. The Corporation will pay any
and all documentary stamp or similar issue or transfer taxes payable in respect
of the issue or delivery of shares of Class A Common on conversion of the Class
B Common pursuant hereto; provided however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of shares of Class A Common in a name other that of the
original holder of the Class B Common to be converted and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
-4-
<PAGE> 5
(f) Additional Rights of Class B Common. In the event that the
Corporation shall enter into any consolidation, merger, combination or other
transaction in which shares of any class of Common Stock are exchanged for or
changed into other stock or securities, then, and in such event, the shares of
each class of Common Stock (assuming conversion of the Class B Common into Class
A Common at the rate specified in subparagraph 5(a) above) shall be exchanged
for or changed into an amount per share equal to the amount of stock,
securities, cash and/or any other property, as the case may be, into which or
for which each share of the other class of Common Stock is exchanged or changed;
provided, however, that if shares of Class A Common and Class B Common are
exchanged for or changed into shares of capital stock, such shares so exchanged
for or changed into may differ to the extent and only to the extent that the
Class A Common and Class B Common differ as provided herein.
In the event of a reclassification, change of outstanding shares (other
than a change in par value or as a result of any subdivision or combination) or
other similar transaction as a result of which the shares of Class A Common are
converted into another security, then a holder of Class B Common shall be
entitled to receive upon conversion the amount of such security that such holder
would have received if such conversion had occurred immediately prior to the
record date of such reclassification or other similar transaction.
If a share of Class B Common shall be converted subsequent to the
record date for the payment of a dividend or other distribution on shares of
Class B Common but prior to such payment, then the registered holder of such
share at the close of business on such record date shall be entitled to receive
the dividend or other distribution payable on such share on such date
notwithstanding the conversion thereof.
ARTICLE SIX
The Corporation is to have perpetual existence.
ARTICLE SEVEN
The number of directors which constitute the whole Board of Directors
of the Corporation shall be fixed exclusively by one or more resolution adopted
from time to time by the Board of Directors. The Board of Directors shall be
divided into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first annual
meeting of stockholders following the date hereof, the term of office of the
Class I directors shall expire and Class I directors shall be elected for a full
term of three years. At the second annual meeting of stockholders following the
date hereof, the term of office of the Class II directors shall expire and Class
II directors shall be elected for a full term of three years. At the third
annual meeting of stockholders following the date hereof, the term of office of
the Class III directors shall expire and Class III directors shall be elected
for a full term of three years. At each succeeding annual meeting of
-5-
<PAGE> 6
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose term expire at such annual meeting.
ARTICLE EIGHT
In furtherance and not in limitation of the powers conferred by the
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
ARTICLE NINE
To the fullest extent permitted by the Delaware General Corporation Law
as the same exists or as may hereafter be amended, a director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director.
The Corporation may indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he or she, or his or her testator or intestate is or was a director,
officer or employee of the Corporation or any predecessor of the Corporation or
serves or served at any other enterprise as a director, officer or employee at
the request of the Corporation or any predecessor to the Corporation.
Neither any amendment nor repeal of this Article Ten, nor the adoption
of any provision of this Corporation's Certificate of Incorporation inconsistent
with this Article Ten, shall eliminate or reduce the effect of this Article Ten,
in respect of any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article Ten, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE TEN
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE ELEVEN
Vacancies created by the resignation of one or more members of the
Board of Directors and newly created directorships, created in accordance with
the Bylaws of this Corporation, may be filled by the vote of a majority,
although less than a quorum, of the directors then in office, or by a sole
remaining director.
ARTICLE TWELVE
-6-
<PAGE> 7
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation.
ARTICLE THIRTEEN
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE FOURTEEN
The Corporation expressly elects not to be governed by the provisions
of Section 203 of the Delaware General Corporation Law.
-7-
<PAGE> 8
THE UNDERSIGNED, being the Chief Executive Officer of this Corporation,
does make this certificate, hereby declaring and certifying that this is his act
and deed and the facts herein stated are true, and accordingly, has hereunto set
his hand on July 28, 1999.
MCAFEE.COM CORPORATION
a Delaware corporation
By: /s/ SRIVATS SAMPATH
---------------------------------
Srivats Sampath
Chief Executive Officer
ATTEST:
By: /s/ KURT BERNEY
----------------------------------
Kurt Berney
Assistant Secretary
-8-
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
MCAFEE.COM CORPORATION
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I CORPORATE OFFICES......................................................................1
1.1 REGISTERED OFFICE.................................................................1
1.2 OTHER OFFICES.....................................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS..............................................................1
2.1 PLACE OF MEETINGS.................................................................1
2.2 ANNUAL MEETING....................................................................1
2.3 SPECIAL MEETING...................................................................2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS..................................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS...................2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE......................................3
2.7 QUORUM............................................................................3
2.8 ADJOURNED MEETING; NOTICE.........................................................4
2.9 VOTING............................................................................4
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT.................................5
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING...........................5
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING........................................5
2.13 PROXIES...........................................................................6
2.14 ORGANIZATION......................................................................6
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE.............................................6
2.16 INSPECTORS OF ELECTION............................................................7
ARTICLE III DIRECTORS............................................................................8
3.1 POWERS............................................................................8
3.2 NUMBER OF DIRECTORS...............................................................8
3.3 CLASSES OF DIRECTORS..............................................................8
3.4 RESIGNATION AND VACANCIES.........................................................9
3.5 REMOVAL OF DIRECTORS.............................................................10
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.........................................10
3.7 FIRST MEETINGS...................................................................10
3.8 REGULAR MEETINGS.................................................................10
3.9 SPECIAL MEETINGS; NOTICE.........................................................10
3.10 QUORUM...........................................................................11
3.11 WAIVER OF NOTICE.................................................................11
3.12 ADJOURNMENT......................................................................11
3.13 NOTICE OF ADJOURNMENT............................................................11
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................................12
3.15 FEES AND COMPENSATION OF DIRECTORS...............................................12
3.16 APPROVAL OF LOANS TO OFFICERS....................................................12
</TABLE>
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3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION...........................12
ARTICLE IV COMMITTEES...........................................................................12
4.1 COMMITTEES OF DIRECTORS..........................................................13
4.2 MEETINGS AND ACTION OF COMMITTEES................................................13
4.3 COMMITTEE MINUTES................................................................13
ARTICLE V OFFICERS..............................................................................14
5.1 OFFICERS.........................................................................14
5.2 ELECTION OF OFFICERS.............................................................14
5.3 SUBORDINATE OFFICERS.............................................................14
5.4 REMOVAL AND RESIGNATION OF OFFICERS..............................................14
5.5 VACANCIES IN OFFICES.............................................................15
5.6 CHAIRMAN OF THE BOARD............................................................15
5.7 CHIEF EXECUTIVE OFFICER..........................................................15
5.8 PRESIDENT........................................................................15
5.9 VICE PRESIDENTS..................................................................16
5.10 SECRETARY........................................................................16
5.11 CHIEF FINANCIAL OFFICER..........................................................16
5.12 ASSISTANT SECRETARY..............................................................17
5.13 ADMINISTRATIVE OFFICERS..........................................................17
5.14 AUTHORITY AND DUTIES OF OFFICERS.................................................17
ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS.................17
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS........................................17
6.2 INDEMNIFICATION OF OTHERS........................................................18
6.3 INSURANCE........................................................................19
ARTICLE VII RECORDS AND REPORTS.................................................................19
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................................19
7.2 INSPECTION BY DIRECTORS..........................................................19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.................................................19
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS...................................20
7.5 CERTIFICATION AND INSPECTION OF BYLAWS...........................................20
ARTICLE VIII GENERAL MATTERS....................................................................20
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING............................20
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS........................................20
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED...............................21
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES.................................21
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8.5 SPECIAL DESIGNATION ON CERTIFICATES..............................................22
8.6 LOST CERTIFICATES................................................................22
8.7 TRANSFER AGENTS AND REGISTRARS...................................................22
8.8 CONSTRUCTION; DEFINITIONS........................................................22
ARTICLE IX AMENDMENTS...........................................................................23
ARTICLE X DISSOLUTION...........................................................................23
ARTICLE XI CUSTODIAN............................................................................24
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES......................................24
11.2 DUTIES OF CUSTODIAN..............................................................24
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<PAGE> 5
AMENDED AND RESTATED BYLAWS
OF
MCAFEE.COM CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
certificate of incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the second
Monday in June in each year at 9:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
<PAGE> 6
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the chief executive
officer, or by one or more stockholders holding shares in the aggregate entitled
to cast not less than ten percent (10%) of the votes of all shares of stock
owned by stockholders entitled to vote at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the chief executive officer or the chairman of the board,
then the request shall be in writing, specifying the time of such meeting and
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the chief executive
officer, or the secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The officer
receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.6 of these bylaws, that a meeting will be held at the time requested by
the person or persons calling the meeting, so long as that time is not less than
thirty-five (35) nor more than sixty (60) days after the receipt of the request.
If the notice is not given within twenty (20) days after receipt of the request,
then the person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph of this Section 2.3 shall be construed as limiting,
fixing or affecting the time when a meeting of stockholders called by action of
the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise given
in accordance with Section 2.5 of these bylaws not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The notice shall specify
the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called (no business
other than that specified in the notice may be transacted) or (ii) in the case
of the annual meeting, those matters which the board of directors, at the time
of giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
(a) To be properly brought before an annual meeting or
special meeting, nominations for the election of directors or other business
must be (i) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the board of directors, (ii) otherwise properly
brought before the meeting by or at the direction of the board of directors or
(iii) otherwise properly brought before the meeting by a stockholder.
(b) For business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the
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corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the corporation not less than
one hundred twenty (120) calendar days in advance of the date specified in the
corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting of stockholders; provided, however, that in the
event that no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than thirty (30) days from the date
contemplated at the time of the previous year's proxy statement, notice by the
stockholder to be timely must be so received a reasonable time before the
solicitation is made. Notwithstanding anything in these bylaws to the contrary,
no business shall be conducted at any annual meeting except in accordance with
the procedures set forth in this Section 2.5. The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this Section 2.5, and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
(c) Nominations of persons for election to the Board of
Directors of the corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors or by any stockholder of the corporation
entitled to vote in the election of directors at the meeting.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication. If any notice addressed to a
stockholder at the address of that stockholder appearing on the books of the
corporation is returned to the corporation by the United States Postal Service
marked to indicate that the United States Postal Service is unable to deliver
the notice to the stockholder at that address, then all future notices or
reports shall be deemed to have been duly given without further mailing if the
same shall be available to the stockholder on written demand of the stockholder
at the principal executive office of the corporation for a period of one (1)
year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting
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<PAGE> 8
of the stockholders, then either (i) the chairman of the meeting or (ii) the
holders of a majority of the shares represented at the meeting and entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting in accordance with Section 2.8 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by (i) the chairman of the meeting
or (ii) the vote of the holders of a majority of the shares represented at that
meeting and entitled to vote thereat, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.7 of these bylaws.
When a meeting is adjourned to another time and place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgers and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation
or these bylaws, each stockholder shall be entitled to one vote for each share
of capital stock held by such stockholder. Any stockholder entitled to vote on
any matter may vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or, except when the matter is the election of
directors, may vote them against the proposal; but, if the stockholder fails to
specify the number of shares which the stockholder is voting affirmatively, it
will be conclusively presumed that the stockholder's approving vote is with
respect to all shares which the stockholder is entitled to vote.
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<PAGE> 9
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of stockholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing setting forth the action so
taken shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Such consents shall be delivered to the corporation by delivery to it
registered office in the state of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not precede the date upon which the resolution fixing the record
date is adopted by the board of directors and which shall not be more than sixty
(60) days nor less than ten (10) days before the date of any such meeting, and
in such event only stockholders of record on the date so fixed are entitled to
notice and to vote, notwithstanding any transfer of any shares on the books of
the corporation after the record date.
If the board of directors does not so fix a record date:
(a) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the business day next preceding the day
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<PAGE> 10
on which notice is given, or, if notice is waived, at the close of business on
the business day next preceding the day on which the meeting is held; and
(b) the record date for determining stockholders entitled to
give consent to corporate action in writing without a meeting, (i) when no prior
action by the board is required, shall be the day on which the first written
consent is delivered to the corporation as provided in Section 2.3(b) of the
General Corporation Law of Delaware, or (ii) when prior action by the board is
required, shall be at the close of business on the day on which the board adopts
the resolution relating to that action.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section
8.1 of these bylaws.
2.13 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
2.14 ORGANIZATION
The chief executive officer, or in the absence of the chief executive
officer, the chairman of the board, shall call the meeting of the stockholders
to order, and shall act as chairman of the meeting. In the absence of the chief
executive officer, the chairman of the board, the president, and all of the vice
presidents, the stockholders shall appoint a chairman for such meeting. The
chairman of any meeting of stockholders shall determine the order of business
and the procedures at the meeting, including such matters as the regulation of
the manner of voting and the conduct of business. The secretary of the
corporation shall act as secretary of all meetings of the stockholders, but in
the absence of the secretary at any meeting of the stockholders, the chairman of
the meeting may appoint any person to act as secretary of the meeting.
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
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and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
2.16 INSPECTORS OF ELECTION
Before any meeting of stockholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any stockholder or a stockholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting pursuant to the request of one (1) or more stockholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any stockholder or
a stockholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the
voting power of each, the number of shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any
way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
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ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
to any limitations in the certificate of incorporation or these bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
3.2 NUMBER OF DIRECTORS
The authorized number of directors shall be five (5) until changed, by a
bylaw amending this Section 3.2, duly adopted by the board of directors or by
the stockholders. The definite number of directors may be changed, or an
indefinite number may be fixed without provision for a definite number, by a
duly adopted amendment to the certificate of incorporation or by an amendment to
this bylaw adopted by the vote of holders of a majority of the outstanding
shares entitled to vote or by resolution of a majority of the board of
directors.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires. If for
any cause, the directors shall not have been elected at an annual meeting, they
may be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in the bylaws.
3.3 CLASSES OF DIRECTORS
The directors shall be divided into three classes designated as Class I,
Class II and Class III, respectively. Directors shall be assigned to each class
in accordance with a resolution or resolutions adopted by the board of
directors. At the first annual meeting of stockholders following the initial
adoption of these bylaws, the term of office of the Class I directors shall
expire and Class I directors shall be elected for a full term of three years. At
the second annual meeting of stockholders following the initial adoption of
these bylaws, the term of office of the Class II directors shall expire and
Class II directors shall be elected for a full term of three years. At the third
annual meeting of stockholders following the initial adoption of these bylaws,
the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected each for a full term
of three years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this article, each directors
shall serve until his successor is duly elected and qualified or until his
earlier death, resignation or removal. No decrease in the number of directors
constituting the board of directors shall shorten the term of any incumbent
director.
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3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the chief executive officer, the secretary or the board
of directors, unless the notice specifies a later time for that resignation to
become effective. If the resignation of a director is effective at a future
time, the board of directors may elect a successor to take office when the
resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(a) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(b) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the pro-visions of the certificate of incorporation or these bylaws, or may
apply to the Court of Chancery for a decree summarily ordering an election as
provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
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3.5 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, if and so long as stockholders of the corporation are entitled to
cumulative voting, if less than the entire board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.
3.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held
at such time and place as shall be fixed by the vote of the stockholders at the
annual meeting. In the event of the failure of the stockholders to fix the time
or place of such first meeting of the newly elected board of directors, or in
the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as herein-after provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time as shall from time to time be determined by the board of directors. If
any regular meeting day shall fall on a legal holiday, then the meeting shall be
held at the same time and place on the next succeeding full business day.
3.9 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the chief executive
officer, the president, any vice president, the secretary or any two directors.
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Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy or telegram, it shall be
delivered personally or by telephone or telecopy or to the telegraph company at
least forty-eight (48) hours before the time of the holding of the meeting. Any
oral notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the meeting
is to be held at the principal executive office of the corporation.
3.10 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.12 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the quorum for that meeting.
3.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers shall be filed with the corporate
records or made part of the minutes of the meeting. A waiver of notice need not
specify the purpose of any regular or special meeting of the board of directors.
3.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting of the board to another time and place.
3.13 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting of the
board need not be given unless the meeting is adjourned for more than
twenty-four (24) hours. If the meeting is adjourned for more than twenty-four
(24) hours, then notice of the time and place of the adjourned meeting shall be
given before the adjourned meeting takes place, in the manner specified in
Section 3.9 of these bylaws, to the directors who were not present at the time
of the adjournment.
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3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board of directors.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION
In the event only one director is required by these bylaws or the
certificate of incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the directors
shall be deemed to refer to such notice, waiver, etc., by such sole director,
who shall have all the rights and duties and shall be entitled to exercise all
of the powers and shall assume all the responsibilities otherwise herein
described as given to the board of directors.
ARTICLE IV
COMMITTEES
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4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
committee, to the extent provided in the resolution of the board, shall have and
may exercise all the powers and authority of the board, but no such committee
shall have the power or authority to (i) amend the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the following provisions of Article III of these
bylaws: Section 3.6 (place of meetings; meetings by telephone), Section 3.8
(regular meetings), Section 3.9 (special meetings; notice), Section 3.10
(quorum), Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section
3.13 (notice of adjournment) and Section 3.14 (board action by written consent
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the board of directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
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ARTICLE V
OFFICERS
5.1 OFFICERS
The Corporate Officers of the corporation shall be a chief executive
officer, a secretary and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, a
president, one or more vice presidents (however denominated), one or more
assistant secretaries, one or more assistant treasurers and such other officers
as may be appointed in accordance with the provisions of Section 5.3 of these
bylaws. Any number of offices may be held by the same person.
In addition to the Corporate Officers of the Company described above,
there may also be such Administrative Officers of the corporation as may be
designated and appointed from time to time by the chief executive officer of the
corporation in accordance with the provisions of Section 5.13 of these bylaws.
5.2 ELECTION OF OFFICERS
The Corporate Officers of the corporation, except such officers as may
be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment, and shall hold their
respective offices for such terms as the board of directors may from time to
time determine.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the chief executive
officer to appoint, such other Corporate Officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such power and authority, and perform such duties as are provided in these
bylaws or as the board of directors may from time to time determine.
The chief executive officer may from time to time designate and appoint
Administrative Officers of the corporation in accordance with the provisions of
Section 5.13 of these bylaws.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of a Corporate Officer under any contract
of employment, any Corporate Officer may be removed, either with or without
cause, by the board of directors at any regular or special meeting of the board
or, except in case of a Corporate Officer chosen by the board of directors, by
any Corporate Officer upon whom such power of removal may be conferred by the
board of directors.
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Any Corporate Officer may resign at any time by giving written notice to
the corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Corporate
Officer is a party.
Any Administrative Officer designated and appointed by the chief
executive officer may be removed, either with or without cause, at any time by
the chief executive officer. Any Administrative Officer may resign at any time
by giving written notice to the chief executive officer or to the secretary of
the corporation.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise such other
powers and perform such other duties as may from time to time be assigned to him
by the board of directors or as may be prescribed by these bylaws. If there is
no chief executive officer, then the chairman of the board shall also be the
chief executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.7 of these bylaws.
5.7 CHIEF EXECUTIVE OFFICER
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
chief executive officer shall be subject to the control of the board of
directors and have general supervision, direction and control of the business.
He or she shall preside at all meetings of the stockholders and, in the absence
or non-existence of the chairman of the board, at all meetings of the board of
directors. He or she shall have the general powers and duties of management
usually vested in the office of the chief executive officer of a corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the board of directors or these bylaws.
5.8 PRESIDENT
In the absence or disability of the chief executive officer, and if
there is no chairman of the board, the president shall perform all the duties of
the chief executive officer and when so acting shall have the power of, and be
subject to all the restrictions upon, the chief executive officer. The president
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the chief executive officers or the chairman of the board.
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5.9 VICE PRESIDENTS
In the absence or disability of the president, and if there is no chief
executive officer and no chairman of the board, the vice presidents, if any, in
order of their rank as fixed by the board of directors or, if not ranked, a vice
president designated by the board of directors, shall perform all the duties of
the president and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the president. The vice presidents shall have such
other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president, the chief executive officer, or the chairman of the board.
5.10 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of the board of directors,
committees of directors and stockholders. The minutes shall show the time and
place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.11 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director for a purpose reasonably related to his
position as a director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He or she shall disburse the funds of
the corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have
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such other powers and perform such other duties as may be prescribed by the
board of directors or these bylaws.
5.12 ASSISTANT SECRETARY
The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
5.13 ADMINISTRATIVE OFFICERS
In addition to the Corporate Officers of the corporation as provided in
Section 5.1 of these bylaws and such subordinate Corporate Officers as may be
appointed in accordance with Section 5.3 of these bylaws, there may also be such
Administrative Officers of the corporation as may be designated and appointed
from time to time by the president of the corporation. Administrative Officers
shall perform such duties and have such powers as from time to time may be
determined by the president or the board of directors in order to assist the
Corporate Officers in the furtherance of their duties. In the performance of
such duties and the exercise of such powers, however, such Administrative
Officers shall have limited authority to act on behalf of the corporation as the
board of directors shall establish, including but not limited to limitations on
the dollar amount and on the scope of agreements or commitments that may be made
by such Administrative Officers on behalf of the corporation, which limitations
may not be exceeded by such individuals or altered by the president without
further approval by the board of directors.
5.14 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing powers, authority and duties, all officers
of the corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the board of directors.
ARTICLE VI I
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the General Corporation Law of Delaware as the same now exists or may
hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit, or proceeding in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the corporation. For purposes of
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this Section 6.1, a "director" or "officer" of the corporation shall mean any
person (i) who is or was a director or officer of the corporation, (ii) who is
or was serving at the request of the corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise or
(iii) who was a director or officer of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of Directors of the corporation.
The corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director or officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the corporation's Certificate of Incorporation,
these bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
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6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
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7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the president, any vice president,
the chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise altered
to date, certified by the secretary, shall be kept at the corporation's
principal executive office and shall be open to inspection by the stockholders
of the corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted and
which shall not be more than sixty (60) days before any such action. In that
case, only stockholders of record at the close of business on the date so fixed
are entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board of directors adopts the applicable
resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
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8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize and empower any officer or officers, or agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of the
corporation; such power and authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board of
directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.
Upon surrender to the secretary or transfer agent of the corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock
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certificate issued to represent any such partly paid shares, or upon the books
and records of the corporation in the case of uncertificated partly paid shares,
the total amount of the consideration to be paid therefor and the amount paid
thereon shall be stated. Upon the declaration of any dividend on fully paid
shares, the corporation shall declare a dividend upon partly paid shares of the
same class, but only upon the basis of the percentage of the consideration
actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company -- either domestic or foreign, who shall be
appointed at such times and places as the requirements of the corporation may
necessitate and the board of directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, as used in these bylaws, the singular
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number includes the plural, the plural number includes the singular, and the
term "person" includes both an entity and a natural person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or the filing of the operative written consent(s) shall be stated in
said book.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent
in writing, either in person or by duly authorized attorney, to a dissolution,
no meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in
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accordance with Section 103 of the General Corporation Law of Delaware. Upon
such consent's becoming effective in accordance with Section 103 of the General
Corporation Law of Delaware, the corporation shall be dissolved. If the consent
is signed by an attorney, then the original power of attorney or a photocopy
thereof shall be attached to and filed with the consent. The consent filed with
the Secretary of State shall have attached to it the affidavit of the secretary
or some other officer of the corporation stating that the consent has been
signed by or on behalf of all the stockholders entitled to vote on a
dissolution; in addition, there shall be attached to the consent a certification
by the secretary or some other officer of the corporation setting forth the
names and residences of the directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
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EXHIBIT 10.1
MCAFEE.COM CORPORATION
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is entered into as of the
day of _________, 1999 by and between McAfee.com Corporation, a Delaware
corporation (the "Company") and ________________ ("Indemnitee").
RECITALS
A. The Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance,
and the general reductions in the coverage of such insurance.
B. The Company and Indemnitee further recognize the substantial increase
in corporate litigation in general, subjecting directors, officers, employees,
agents and fiduciaries to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited.
C. Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other directors,
officers, employees, agents and fiduciaries of the Company may not be willing to
continue to serve in such capacities without additional protection.
D. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part, in
order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law.
E. In view of the considerations set forth above, the Company desires
that Indemnitee be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any threatened, pending or
completed action, suit, proceeding or alternative dispute resolution mechanism,
or any hearing, inquiry or investigation that Indemnitee in good faith believes
might lead to the institution of any such action, suit, proceeding or
alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other (hereinafter a "Claim") by reason of (or
arising in part out of) any event or occurrence related to the fact that
Indemnitee is or was a director, officer, employee, agent or fiduciary of the
Company, or any subsidiary of the Company, or is or was serving at the request
of the Company as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action or inaction on the part of Indemnitee while serving in such
capacity (hereinafter an "Indemnifiable Event") against any and all expenses
(including attorneys' fees and all other costs, expenses and obligations
incurred in connection with investigating, defending,
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being a witness in or participating in (including on appeal), or preparing to
defend, be a witness in or participate in, any such action, suit, proceeding,
alternative dispute resolution mechanism, hearing, inquiry or investigation),
judgments, fines, penalties and amounts paid in settlement (if such settlement
is approved in advance by the Company, which approval shall not be unreasonably
withheld) of such Claim and any federal, state, local or foreign taxes imposed
on Indemnitee as a result of the actual or deemed receipt of any payments under
this Agreement (collectively, hereinafter "Expenses"), including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses. Such payment of Expenses shall be made by the Company as soon
as practicable but in any event no later than five days after written demand by
Indemnitee therefor is presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the obligations
of the Company under Section 1(a) shall be subject to the condition that the
Reviewing Party (as described in Section 10(e) hereof) shall not have determined
(in a written opinion, in any case in which the Independent Legal Counsel
referred to in Section 1(c) hereof is involved) that Indemnitee would not be
permitted to be indemnified under applicable law, and (ii) the obligation of the
Company to make an advance payment of Expenses to Indemnitee pursuant to Section
2(a) (an "Expense Advance") shall be subject to the condition that, if, when and
to the extent that the Reviewing Party determines that Indemnitee would not be
permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 1(c) hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company hereby consents to service of process
and to appear in any such proceeding. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there is a Change in
Control of the Company (other than a Change in Control which has been approved
by a majority of the Company's Board of Directors who were directors immediately
prior to such Change in Control) then, with respect to all matters thereafter
arising concerning the rights of Indemnitee to payments of Expenses and Expense
Advances under this Agreement or any other agreement or under the Company's
Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected
by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law and the
Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to fully
indemnify such counsel against any and all expenses (including attorneys' fees),
claims, liabilities and damages arising out of or relating to this Agreement or
its engagement pursuant hereto.
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(d) Mandatory Payment of Expenses. Notwithstanding any other provision
of this Agreement other than Section 9 hereof, to the extent that Indemnitee has
been successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit,
proceeding, inquiry or investigation referred to in Section (1)(a) hereof or in
the defense of any claim, issue or matter therein, Indemnitee shall be
indemnified against all Expenses incurred by Indemnitee in connection therewith.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all Expenses
incurred by Indemnitee. The advances to be made hereunder shall be paid by the
Company to Indemnitee as soon as practicable but in any event no later than five
days after written demand by Indemnitee therefor to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) No Presumptions; Burden of Proof. For purposes of this Agreement,
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law. In addition,
neither the failure of the Reviewing Party to have made a determination as to
whether Indemnitee has met any particular standard of conduct or had any
particular belief, nor an actual determination by the Reviewing Party that
Indemnitee has not met such standard of conduct or did not have such belief,
prior to the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified under applicable
law, shall be a defense to Indemnitee's claim or create a presumption that
Indemnitee has not met any particular standard of conduct or did not have any
particular belief. In connection with any determination by the Reviewing Party
or otherwise as to whether Indemnitee is entitled to be indemnified hereunder,
the burden of proof shall be on the Company to establish that Indemnitee is not
so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company
of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of Indemnitee, all amounts payable as a result of such action, suit,
proceeding, inquiry or investigation in accordance with the terms of such
policies.
(e) Selection of Counsel. In the event the Company shall be obligated
hereunder to pay the Expenses of any Claim, the Company, if appropriate, shall
be entitled to assume the defense of such Claim with counsel approved by
Indemnitee, upon the delivery to Indemnitee of written notice of its election so
to do. After delivery of such notice, approval of such counsel by Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall
have the right to employ Indemnitee's counsel in any such Claim at Indemnitee's
expense and (ii) if (A) the employment of counsel by
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Indemnitee has been previously authorized by the Company, (B) Indemnitee shall
have reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the Company
shall not continue to retain such counsel to defend such Claim, then the fees
and expenses of Indemnitee's counsel shall be at the expense of the Company.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify a
member of its Board of Directors or an officer, employee, agent or fiduciary, it
is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its Board of Directors or an
officer, employee, agent or fiduciary, such change, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder except as set forth in Section 8(a) hereof.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall be in addition to any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, the General Corporation Law of the
State of Delaware, or otherwise. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though Indemnitee may have ceased
to serve in such capacity.
4. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Certificate of Incorporation, Bylaw or otherwise)
of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of
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the Company but is an officer; or of the Company's key employees, agents or
fiduciaries, if Indemnitee is not an officer or director but is a key employee,
agent or fiduciary.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for acts,
omissions or transactions from which Indemnitee may not be relieved of liability
under applicable law;
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be;
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
9. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an
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employee benefit plan; and references to "serving at the request of the Company"
shall include any service as a director, officer, employee, agent or fiduciary
of the Company which imposes duties on, or involves services by, such director,
officer, employee, agent or fiduciary with respect to an employee benefit plan,
its participants or its beneficiaries; and if Indemnitee acted in good faith and
in a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Company
representing more than 50% of the total voting power represented by the
Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 50% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
transactions) all or substantially all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal Counsel" shall
mean an attorney or firm of attorneys, selected in accordance with the
provisions of Section 1(c) hereof, who shall not have otherwise performed
services for the Company or Indemnitee within the last three years (other than
with respect to matters concerning the rights of Indemnitee under this
Agreement, or of other indemnitees under similar indemnity agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall mean
any appropriate person or body consisting of a member or members of the
Company's Board of Directors or any other person or body appointed by the Board
of Directors who is not a party to the particular Claim for which Indemnitee is
seeking indemnification, or Independent Legal Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall mean
any securities of the Company that vote generally in the election of directors.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representatives. The Company shall require
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and cause any successor (whether direct or indirect by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business and/or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary of the Company or of any other
enterprise at the Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless, as a part of such action, a
court of competent jurisdiction over such action determines that each of the
material assertions made by Indemnitee as a basis for such action was not made
in good faith or was frivolous. In the event of an action instituted by or in
the name of the Company under this Agreement to enforce or interpret any of the
terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses
incurred by Indemnitee in defense of such action (including costs and expenses
incurred with respect to Indemnitee's counterclaims and cross-claims made in
such action), and shall be entitled to the advancement of Expenses with respect
to such action, unless, as a part of such action, a court having jurisdiction
over such action determines that each of Indemnitee's material defenses to such
action was made in bad faith or was frivolous.
14. Notice. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day of delivery by
facsimile transmission, if delivered by facsimile transmission with copy by
first class mail, postage prepaid, and shall be addressed if to the Indemnitee,
at the Indemnitee's address as set forth beneath his signature to this Agreement
and if to the Company at the address of its principal corporate offices
(attention: Secretary) or at such other address as such party may designate by
ten days' advance written notice to the other party hereto.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
Delaware, as applied to contracts between Delaware residents, entered into and
to be performed entirely within the State of Delaware, without regard to the
conflict of laws principles thereof.
7
<PAGE> 8
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MCAFEE.COM CORPORATION
a Delaware corporation
By: ________________________________
Title: _____________________________
Address: 2810 Bowers Avenue
Santa Clara, California 95054
AGREED TO AND ACCEPTED BY:
INDEMNITEE
______________________________
[Name]
Address: _____________________
_____________________
_____________________
<PAGE> 1
EXHIBIT 10.2
MCAFEE.COM CORPORATION
AMENDED AND RESTATED
1999 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1999 Stock Plan are:
o to attract and retain the best available personnel
for positions of substantial responsibility,
o to provide additional incentive to Employees,
Directors and Consultants, and
o to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options
or Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its
Committees as shall be administering the Plan, in accordance with Section 4 of
the Plan.
(b) "Applicable Laws" means the requirements relating to
the administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a committee of Directors appointed
by the Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means McAfee.com Corporation, a Delaware
corporation.
<PAGE> 2
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(m) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
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<PAGE> 3
(n) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic
notice evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the
Plan.
(s) "Option Agreement" means an agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(t) "Option Exchange Program" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(u) "Optioned Stock" means the Common Stock subject to an
Option or Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option
or Stock Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this Amended and Restated 1999 Stock
Plan.
(y) "Restricted Stock" means shares of Common Stock
acquired pursuant to a grant of Stock Purchase Rights under Section 11 of the
Plan.
(z) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or
any successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.
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<PAGE> 4
(bb) "Section 16(b) " means Section 16(b) of the Exchange
Act.
(cc) "Service Provider" means an Employee, Director or
Consultant.
(dd) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase
Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of
Grant.
(ff) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares that may be
optioned and sold under the Plan is 8,388,000 Shares, plus an annual increase to
be added on the date of the Annual Stockholder's Meeting equal to the lesser of
(i) 2,500,000 shares of Class A Common Stock, (ii) 5% of the outstanding Shares
on such date, or (iii) an amount determined by the Board. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
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<PAGE> 5
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the
provisions of the Plan, and in the case of a Committee, subject to the specific
duties delegated by the Board to such Committee, the Administrator shall have
the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common
Stock to be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or
Stock Purchase Right to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option or Stock Purchase Right shall
have declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
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<PAGE> 6
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 15(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options longer
than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The
Administrator's decisions, determinations and interpretations shall be final and
binding on all Optionees and any other holders of Options or Stock Purchase
Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase
Right shall confer upon an Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of
Options:
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<PAGE> 7
(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 2,500,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
2,500,000 Shares which shall not count against the limit set forth in subsection
(i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan
shall become effective upon its adoption by the Board. It shall continue in
effect for a term of ten (10) years unless terminated earlier under Section 15
of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(1) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
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<PAGE> 8
(2) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator. In the case
of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an
Option is granted, the Administrator shall fix the period within which the
Option may be exercised and shall determine any conditions that must be
satisfied before the Option may be exercised.
(c) Form of Consideration. The Administrator shall
determine the acceptable form of consideration for exercising an Option,
including the method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the time
of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
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10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If
an Optionee ceases to be a Service Provider, other than upon the Optionee's
death or Disability, the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). In
the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the Optionee's termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option
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<PAGE> 10
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a
Service Provider, the Option may be exercised within such period of time as is
specified in the Option Agreement (but in no event later than the expiration of
the term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares an Option previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing or electronically, by means of a
Notice of Grant, of the terms, conditions and restrictions related to the offer,
including the number of Shares that the offeree shall be entitled to purchase,
the price to be paid, and the time within which the offeree must accept such
offer. The offer shall be accepted by execution of a Restricted Stock Purchase
Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator
determines otherwise, the Restricted Stock Purchase Agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's service with the Company for any reason
(including death or Disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock Purchase Agreement shall be the original price
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<PAGE> 11
paid by the purchaser. The repurchase option shall lapse at a rate determined by
the Administrator.
(c) Other Provisions. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion.
(d) Rights as a Shareholder. Once the Stock Purchase
Right is exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights.
Unless determined otherwise by the Administrator, an Option or Stock Purchase
Right may not be sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or by the laws of descent or distribution
and may be exercised, during the lifetime of the Optionee, only by the Optionee.
If the Administrator makes an Option or Stock Purchase Right transferable, such
Option or Stock Purchase Right shall contain such additional terms and
conditions as the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options or Stock Purchase Rights have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right.
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<PAGE> 12
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option or Stock Purchase
Right shall lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Option or Stock Purchase Right
will terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock
Purchase Right shall be, for all purposes, the date on which the Administrator
makes the determination granting such Option or Stock Purchase Right, or such
other later date as is determined by the
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<PAGE> 13
Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant
to the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the
exercise of an Option or Stock Purchase Right, the Company may require the
person exercising such Option or Stock Purchase Right to represent and warrant
at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
17. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
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<PAGE> 14
19. Shareholder Approval. The Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.
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<PAGE> 1
EXHIBIT 10.3
MCAFEE.COM
1999 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1999 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means McAfee.com, a Delaware corporation.
(e) "Director" means a member of the Board.
(f) "Disability" means total and permanent disability as defined
in section 22(e)(3) of the Code.
(g) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the
Company. The payment of a Director's fee by the Company shall
not be sufficient in and of itself to constitute "employment"
by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall
<PAGE> 2
be the mean between the high bid and low asked prices for the Common Stock for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "Inside Director" means a Director who is an Employee.
(k) "Option" means a stock option granted pursuant to the Plan.
(l) "Optioned Stock" means the Common Stock subject to an Option.
(m) "Optionee" means a Director who holds an Option.
(n) "Outside Director" means a Director who is not an Employee.
(o) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1999 Director Option Plan.
(q) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 150,000 Shares, plus an annual increase to be added as of
the date of the Annual Stockholders Meeting equal to the number of Shares
required to restore the maximum number of shares available for new option grants
to 150,000 Shares (the "Pool"). The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
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<PAGE> 3
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 40,000 Shares (the "First Option") on the date on which the
later of the following events occurs, after the Company's initial public
offering on which such person first becomes an Outside Director, whether through
election by the shareholders of the Company or appointment by the Board to fill
a vacancy; provided, however, that an Inside Director who ceases to be an Inside
Director but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 10,000 Shares (a "Subsequent Option") each year on the
anniversary date of the Outside Director's election or appointment to the Board
provided he or she is then an Outside Director.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10)
years.
(B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option shall
become exercisable as to twenty-five percent (25%) of the Shares subject to the
First Option on the first anniversary of its date of grant and 1/48th of the
Shares each month thereafter, provided that the Optionee continues to serve as a
Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall
be as follows:
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<PAGE> 4
(A) the term of the Subsequent Option shall be ten (10)
years.
(B) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent Option
shall become exercisable as to twenty-five percent (25%) of the Shares subject
to the Subsequent Option on the first anniversary of its date of grant and
1/48th of the Shares each month thereafter, provided that the Optionee continues
to serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made until
such time, if any, as additional Shares become available for grant under the
Plan through action of the Board or the shareholders to increase the number of
Shares which may be issued under the Plan or through cancellation or expiration
of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate the Director's relationship with the Company at
any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
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<PAGE> 5
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to Section 10
hereof, in the event an Optionee's status as a Director terminates (other than
upon the Optionee's death or Disability), the Optionee may exercise his or her
Option, but only within three (3) months following the date of such termination,
and only to the extent that the Optionee was entitled to exercise it on the date
of such termination (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on the date of such termination, and to the extent that the Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as
a Director terminates as a result of Disability, the Optionee may exercise his
or her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
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<PAGE> 6
(d) Death of Optionee. In the event of an Optionee's death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation or the sale of substantially all of the
assets of the Company, outstanding Options may be assumed or equivalent options
may be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If an Option is assumed or substituted
for, the Option or equivalent option shall continue to be exercisable as
provided in Section 4 hereof for so long as the Optionee serves as a Director or
a director of the Successor Corporation. Following such assumption or
substitution, if the Optionee's status as a Director or director of the
Successor Corporation, as applicable, is terminated other than upon a voluntary
resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not
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<PAGE> 7
otherwise be exercisable. Thereafter, the Option or option shall remain
exercisable in accordance with Sections 8(b) through (d) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon
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<PAGE> 8
which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
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<PAGE> 9
MCAFEE.COM
DIRECTOR OPTION AGREEMENT
McAfee.com Corporation, (the "Company"), has granted to
___________________ (the "Optionee"), an option to purchase a total of [________
(____)] shares of the Company's Common Stock (the "Optioned Stock"), at the
price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the Company's 1999 Director Option Plan (the
"Plan") adopted by the Company which is incorporated herein by reference. The
terms defined in the Plan shall have the same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of Common
Stock.
3. Exercise of Option. This Option shall be exercisable during its term in
accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
(a) This Option shall become exercisable in installments
cumulatively with respect to twenty-five percent (25%) of the Optioned Stock one
year after the date of grant, and as to an additional 1/48th of the Optioned
Stock each month thereafter, so that one hundred percent (100%) of the Optioned
Stock shall be exercisable four years after the date of grant; provided,
however, that in no event shall any Option be exercisable prior to the date the
stockholders of the Company approve the Plan.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
4. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
<PAGE> 10
(iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the
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<PAGE> 11
date of exercise of the Option, to the extent not included in income as
described above, will be treated as capital gain or loss.
DATE OF GRANT: ______________
McAfee.com,
A Delaware corporation
By:
---------------------------
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: _________________
------------------------------
Optionee
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<PAGE> 12
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
McAfee.com
3965 Freedom Circle
Santa Clara, CA 95054
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of McAfee.com (the "Company") under and pursuant to the Company's 1999
Director Option Plan and the Director Option Agreement dated _______________
(the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is under
no obligation to register the Shares and that an exemption may not be available
or may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by reference.
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the
<PAGE> 13
subject matter hereof. This Exercise Notice and the Agreement are governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: MCAFEE.COM
By: By:
----------------------- ---------------------------
Its:
--------------------------
Address:
------------------
Dated: Dated:
-------------------- ------------------------
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<PAGE> 1
EXHIBIT 10.4
MCAFEE.COM
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock
Purchase Plan of McAfee.com.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company or any
committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean McAfee.com and any Designated Subsidiary of
the Company.
(e) "Compensation" shall mean all base straight time gross earnings,
commissions, incentive compensation and bonuses, but exclusive of payments for
overtime, profit sharing payments, shift premium payments and incentive
payments.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately
twelve (12) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after February 1 and August
1 of each year and terminating on the last Trading Day in the periods ending
twelve months later; provided, however, that the first Offering Period under the
Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company's Registration Statement
effective and ending on the last Trading Day on or before February 1, 2001. The
duration and timing of Offering Periods may be changed pursuant to Section 4 of
this Plan.
(l) "Plan" shall mean this 1999 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
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<PAGE> 3
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after February 1 and August 1 each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
February 1, 2001. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
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<PAGE> 4
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 2,500
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of
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<PAGE> 5
the Company's Common Stock an Employee may purchase during each Purchase Period
of such Offering Period. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant
-5-
<PAGE> 6
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he
or she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be five hundred thousand (500,000) shares plus an annual increase to be on
the date of the Annual Stockholder's Meeting, equal to the lesser of (i)
1,000,000 shares, (ii) 3% of the outstanding shares on such date or (iii) an
amount determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
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<PAGE> 7
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
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<PAGE> 8
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19 hereof,
no such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board
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<PAGE> 9
of Directors on any Exercise Date if the Board determines that the termination
of the Offering Period or the Plan is in the best interests of the Company and
its shareholders. Except as provided in Section 19 and this Section 20 hereof,
no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law, regulation or stock exchange rule), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period
ends on a new Exercise Date, including an Offering Period underway at the time
of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
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<PAGE> 10
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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<PAGE> 11
EXHIBIT A
MCAFEE.COM
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the McAfee.com
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased by me over the price which I paid for the
shares. I hereby agree to notify the Company in writing within 30 days
after the date of any disposition of my shares and I will make adequate
provision for Federal, state or other tax withholding obligations, if any,
which arise upon the
<PAGE> 12
disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)_____________________________________________________
(First) (Middle) (Last)
_________________________ ___________________________________________
Relationship
___________________________________________
(Address)
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<PAGE> 13
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:________________ ___________________________________________________
Signature of Employee
_____________________________________________________
Spouse's Signature (If beneficiary other than spouse)
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<PAGE> 14
EXHIBIT B
MCAFEE.COM
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the McAfee.com
Employee Stock Purchase Plan which began on ____________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:___________________________
<PAGE> 1
EXHIBIT 10.5
CORPORATE MANAGEMENT SERVICES AGREEMENT
THIS CORPORATE MANAGEMENT SERVICES AGREEMENT (this "Agreement"), is
executed as of January 1, 1999 (the "Effective Date"), by and between NETWORKS
ASSOCIATES, INC., a Delaware corporation ("NAI") and MCAFEE.COM CORPORATION a
Delaware corporation ("McAfee.com").
RECITALS
WHEREAS, McAfee.com is a wholly-owned subsidiary of NAI; and
WHEREAS, McAfee.com is engaged in the field of internet-based software
sales and services, and the conduct of such other activities as may be
incidental or related thereto; and
WHEREAS, McAfee.com has and will have the need for accounting,
administrative, financial, technical, consulting and similar services from time
to time, but has determined that it is not cost effective to maintain all the
infrastructure associated therewith; and
WHEREAS, in the event that McAfee.com issues to the public shares of
its capital stock pursuant to a registration statement under the Securities Act
of 1933, as amended, McAfee.com desires to continue to obtain the foregoing
services from NAI; and
WHEREAS, by this Agreement, McAfee.com and NAI desire to confirm their
agreement with respect to services to be provided to McAfee.com commencing on
January 1, 1999 (the "Effective Date"), and to set forth the basis for NAI's
providing further services of the type referred to herein; and
WHEREAS, NAI is able and willing to provide the foregoing services to
McAfee.com, and McAfee.com desires to engage NAI as an independent contractor to
provide the same in accordance with the terms set forth herein:
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, provisions and covenants contained herein, and for other good and
valuable consideration, the receipt and legal sufficiency whereof are hereby
acknowledged, the parties hereto further agree as follows:
ARTICLE I
SECTION 1. MANAGEMENT SERVICES. Commencing on the Effective Date,
McAfee.com hereby engages and retains NAI through its corporate staff to provide
or otherwise make available to McAfee.com the services described in this Section
1 (the "Management Services"), and NAI hereby accepts and agrees to provide such
Management Services to McAfee.com, for the term and consideration as specified
herein. The fee payable for such Management Services shall be determined in
accordance with Section 3 hereof.
1.1. TAX SERVICES. NAI shall provide McAfee.com with the following
tax services: preparation of federal tax returns; preparation of state and local
tax returns (including income tax returns); filing of state sales and other
state tax returns; preparation of financial statement
<PAGE> 2
disclosures and calculation of tax provisions for financial statement purposes;
conducting negotiations with tax authorities as necessary; and providing tax
research and planning and assistance with respect to federal, state and local
audits. The tax services described in this Section 1.1 shall be provided by NAI
until terminated pursuant to the provisions of Section 6.3 hereof. Upon
termination of such services for any reason, NAI shall provide to McAfee.com
copies of its records relating to federal, state and local tax returns filed by
on behalf of McAfee.com, and all other correspondence and documentation
reasonably required by McAfee.com relating to payment of its taxes.
1.2. ACCOUNTING SERVICES. NAI shall provide McAfee.com with the
following accounting services: maintenance of McAfee.com's general ledger;
maintenance of McAfee.com's accounts payable and accounts receivable records;
and maintenance of McAfee.com's fixed asset records. Such services shall also
include information services support, including account maintenance and
reporting support, access to the on-line intranet reporting tools, access to SAP
software (or its equivalent), access to sales commission database software
services and sales commission database support, and continued remote access
availability to NAI's corporate databases to the same extent that such databases
are available to other NAI business units. The services described in this
Section 1.2 shall also be provided by NAI at the request of McAfee.com in
connection with McAfee.com's preparation of any required filings with the
Securities and Exchange Commission pursuant to federal securities laws. The
services described in this Section 1.2 shall be provided by NAI until terminated
pursuant to the provisions of Section 6.3 hereof.
1.3. INSURANCE SERVICES. NAI shall from and after the Effective
Date continue in force the then existing liability, property, casualty,
indemnity and other business insurance policies applicable to McAfee.com. All of
such insurance coverage shall be maintained by NAI until the respective
termination dates of the current policies in effect with respect thereto.
Thereafter, until terminated pursuant to Section 6.3 hereof, NAI shall provide
or cause to be provided to McAfee.com insurance in such amount and on such terms
as are customary for businesses such as McAfee.com's.
1.4. EMPLOYEE BENEFITS SERVICES. From and after the Effective Date
until terminated pursuant to the provisions of Section 6.3 hereof, NAI shall
provide administrative services, including without limitation filing of all
governmental reports, with respect to the participation of McAfee.com employees
in the following benefit plans: (a) the NAI 401(k) Plan; (b) the McAfee.com
medical, dental, vision, life, AD&D and LTD insurance programs; (c) the
McAfee.com 1999 Stock Option Plan (the "McAfee.com Option Plan"); (d) the
McAfee.com Employee Stock Purchase Plan (the "McAfee.com ESPP"); (e) the NAI
Employee Stock Purchase Plan (the "NAI ESPP"); (f) the Employee Assistance
Program; (g) the Flexible Spending Plan; and (h) the Tuition and Charitable
Contribution Matching Program. Upon termination of the administration services
provided under this Section 1.4, NAI shall provide McAfee.com with such
information and records as are reasonably requested by McAfee.com to enable it
to administer the benefit plans in which its employees are enrolled from and
after January 1, 1999.
1.5. CORPORATE RECORD-KEEPING SERVICES. NAI shall maintain all past
tax, accounting and payroll records relating to McAfee.com, until such time as
such records shall be disposed of in accordance with applicable legal
requirements and NAI's normal record disposition policies. NAI shall give
McAfee.com 30 days' prior written notice of its intention to dispose of such
records and shall provide McAfee.com with the opportunity to retain the same.
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1.6. DIRECTOR SERVICES. In the event that any officer or employee
of NAI acts as a director of McAfee.com, McAfee.com shall remit to NAI all
director and other fees which would otherwise be payable to such person for
acting in such capacity.
1.7. PAYROLL SERVICES. Until terminated pursuant to the provisions
of Section 6.3 hereof, NAI shall provide McAfee.com with payroll services,
including payment processing by an outside vendor; Form 1099 preparation; Form
W-2 preparation; employee-incurred expense reimbursement services; assistance
with any required regulatory compliance in connection with any payroll services
provided pursuant to this Section 1.7; and distribution and maintenance of the
McAfee.com employee database. Upon termination of such services, NAI shall
provide McAfee.com with all payroll records for McAfee.com employees, including
information for calendar year 1999.
1.8. IT SERVICES. Until terminated pursuant to the provisions of
Section 6.3 hereof, NAI shall provide McAfee.com with information technology
services, including assistance with, installation of, and maintenance of
McAfee.com's telephonic and computer equipment during the Term of this
Agreement.
1.9. FACILITIES MANAGEMENT SERVICES. Until terminated pursuant to
the provisions of Section 6.3 hereof, NAI shall provide McAfee.com with all
facilities management services which NAI currently provides in the standard
course of business in facilities occupied by NAI, including building maintenance
and security services at all McAfee.com office buildings.
1.10. LEGAL SERVICES. Until terminated pursuant to the provisions of
Section 6.2 hereof, NAI shall provide McAfee.com with all legal services
reasonably requested by McAfee.com which NAI counsel currently provides NAI in
the standard course of business.
1.11 INVESTOR RELATIONS. Until terminated pursuant to the
provisions of Section 6.2 hereof, NAI shall provide McAfee.com with all investor
relations services reasonably requested by McAfee.com in the standard course of
business.
ARTICLE II
SECTION 2. ADDITIONAL SERVICES. Beginning on such date or dates
subsequent to the Effective Date as are mutually agreed to in writing by the
parties, NAI and its corporate staff will provide or otherwise make available to
McAfee.com such services in addition to those described in Section 1 hereof as
are reasonably requested by McAfee.com, subject in each case to the parties'
agreement to financial consideration and other terms. In the event that
McAfee.com desires to avail itself of any of such additional services, the
parties shall negotiate in good faith to reach agreement on the scope and term
of such services. When and if an agreement is reached, the parties shall prepare
an appropriate schedule or addendum to this Agreement, in which the nature,
scope and quality of such services is described in detail. Each such addendum
shall be executed on behalf of each party hereto, shall be effective as of its
date and shall, upon such effective date, be incorporated into and made an
integral part of this Agreement.
ARTICLE III
SECTION 3. REIMBURSEMENT OF EXPENSES.
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<PAGE> 4
(a) In connection with the Management Services pursuant to Section
1 hereof and Additional Services pursuant to Section 2 hereof,
McAfee.com shall reimburse NAI for any and all expenses or
costs ("Charges") incurred or paid by NAI on behalf of
McAfee.com in the performance of any of its responsibilities
under this Agreement (including an appropriate allocation for
overhead and general and administrative costs).
(b) Unless NAI and McAfee.com shall agree to a different
arrangement contrary to this Section 3(b), and except as
specifically set forth in Section 3(c) hereof, McAfee.com
shall pay to NAI a fee(s) (collectively, the "Fees") for
Management Services and Additional Services in an amount equal
to the following formulation: (i) the overall amount of
expenses and costs attributable to NAI's provision of such
Management Services or Additional Services on a company-wide
basis, including provision of such Services to McAfee.com,
(ii) multiplied by a fraction, (aa) the numerator of which
shall be the number of employees employed at McAfee.com as of
the end of each monthly period, and (bb) the denominator of
which shall be the number of employees employed at NAI, plus
the number of employees employed at McAfee.com, as of the end
of each monthly period, (iii) plus 10% of the amount of
Charges associated with such services. (By way of example
only, if the overall expenses and costs attributable to NAI's
accounting services are $20,000 for a monthly period, and NAI
has 9,800 employees, and McAfee.com has 200 employees, the Fee
payable by McAfee.com to NAI for such monthly period for
accounting services shall be 20,000 x 200/10,000, which equals
400, plus 10% multiplied by 400, which equals a Fee for this
monthly period for accounting services of $440.)
(c) McAfee.com shall pay to NAI Fees for facilities management
services pursuant to Section 1.9 hereof in the following
manner: (i) for rent payments on any facilities NAI provides,
McAfee.com shall pay the direct rent actually paid by NAI,
plus ten percent (10%); and (ii) for all other Fees payable
pursuant to Section 1.9, McAfee.com shall pay the amount that
would be payable if calculated by the formulation provided in
Section 3(b) hereof.
(d) The Charges and Fees shall be billed and payment shall be made
to NAI in U.S. Dollars.
(e) McAfee.com shall also pay any applicable sales or use taxes
payable with respect to the Charges and the Fees.
(f) NAI shall, as and when necessary, prepare all applications,
reports, statements and other documents showing the Charges,
Fees and the related costs and expenses incurred or paid by
NAI on behalf of McAfee.com in the performance of any of its
responsibilities under this Agreement.
(f) To the extent that McAfee.com is billed by an outside provider
directly, McAfee.com shall pay such bill directly. If NAI is
billed by outside providers for services performed for
McAfee.com pursuant to this Agreement, NAI may pay the bill
and charge McAfee.com the amount of the bill or forward the
bill to McAfee.com for payment by McAfee.com. A Fee will be
payable on all amounts paid in connection with services
related to NAI's responsibilities hereunder, regardless of
whether NAI or McAfee.com paid such amounts;
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<PAGE> 5
provided, however, that to the extent that McAfee.com uses an
outside provider directly for any services within the scope of
this Agreement, McAfee.com shall not be liable to NAI for a
Fee relating to such services.
ARTICLE IV
SECTION 4. PAYMENT OF FEES. Amounts payable by McAfee.com for services
provided by NAI under this Agreement shall be payable from and after the first
day of the month following the month in which the Effective Date occurs.
Thereafter, such amounts shall be paid quarterly. Within 15 days after the end
of each calendar quarter, NAI shall submit to McAfee.com a detailed statement of
Charges and Fees, and such statement shall be paid within 30 days of receipt by
McAfee.com.
ARTICLE V
SECTION 5. DISCLAIMER, LIMITED LIABILITY.
(a) NAI will use reasonable efforts to make the Management
Services available (and, if it agrees to provide the
Additional Services, Additional Services) with substantially
the same degree of care as it employs in making the same
services available for its own operations; provided, however,
that NAI shall not be liable to McAfee.com or any other person
for any loss, damage or expense which may result therefrom or
from any change in the manner in which NAI renders such
services, so long as NAI deems such change necessary or
desirable in the conduct of its own operations.
(b) Neither NAI nor any of its officers, directors or agents who
provide services to McAfee.com shall not be liable to
McAfee.com or to any third party, including any governmental
agency or McAfee.com's stockholders, for any claims, damages
or expenses relating to the Management Services (and, if it
agrees to provide the Additional Services, Additional
Services) provided pursuant to this Agreement, except for
willful malfeasance, bad faith or gross negligence in the
performance of their duties or reckless disregard of their
obligations and duties under the terms of this Agreement.
McAfee.com shall have the ultimate responsibility for all
services provided herein.
ARTICLE VI
SECTION 6. TERM AND TERMINATION.
6.1. TERM. Except as provided in Section 6.2 hereof, the initial
term of this Agreement shall commence on the Effective Date and continue through
the end of McAfee.com's then current fiscal year. This Agreement shall
automatically renew at the end of the initial term for successive one-year terms
until terminated in accordance with Section 6.3 hereof.
6.2. TERMINATION UPON CERTAIN EVENTS. Upon the closing of an
initial public offering of McAfee.com's common stock pursuant to the Securities
Act of 1933, as amended, the Management Services provided under Sections 1.10
and 1.11 shall no longer be provided by
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<PAGE> 6
NAI, and this Agreement will terminate with respect to the provision of such
services. Notwithstanding the foregoing, such termination shall not cancel
McAfee.com's obligation to remit payment to NAI, pursuant to Sections 3 and 4
hereof, for the provision of such services in the monthly period prior to the
closing of the initial public offering.
6.3. TERMINATION GENERALLY. This Agreement or any Management
Service specified in Section 1 hereof may be terminated (a) by McAfee.com at
anytime on 30 days' prior notice to NAI, or (b) at the option of NAI exercisable
by written notice to McAfee.com, as of the date that NAI ceases to hold,
directly or indirectly, a majority of the voting power of all classes of
outstanding voting stock of McAfee.com.
6.4. TERMINATION OF SPECIFIC SERVICES. Specific services provided
hereunder may be terminated, or shall expire, as described in Section 1 hereof
or in any schedule or addendum hereto. If and to the extent that NAI incurs
expenses in connection with and resulting from termination of any specific
services provided hereunder, McAfee.com shall reimburse NAI for such costs or
expenses promptly upon receipt of an itemized account thereof.
6.5. POST-TERMINATION SERVICES. In the event of termination of this
Agreement, or a service provided hereunder, pursuant to Section 6.3(a) hereof,
NAI shall be required at McAfee.com's option to continue to provide the
terminated services of the type then being provided to McAfee.com during the
30-day period referred to in Section 6.3(a) hereof and, whether or not
McAfee.com requests continuation of such services, McAfee.com shall continue to
pay NAI the costs of such services for such 30-day period. Subsequent to such
30-day period, or in the event of termination of this Agreement pursuant to
Section 6.3(b), corporate administrative services of the kind provided under the
Agreement may continue to be provided to McAfee.com on an as-requested basis by
McAfee.com, in which event McAfee.com shall be charged by NAI a fee equal to the
market rate for comparable services charged by third-party vendors. Such fee
will be charged monthly and payable by McAfee.com within 30 days. The
obligations of McAfee.com set forth in this Section 6.4 shall survive the
termination of this Agreement.
ARTICLE VII
7.1. STATUS OF THE PARTIES. NAI shall be deemed to be an
independent contractor and, except as expressly provided or authorized in this
Agreement, shall have no authority to act for or represent McAfee.com.
7.2. OTHER ACTIVITIES OF NAI. McAfee.com hereby recognizes that NAI
now renders and may continue to render management and other services to other
companies that may or may not have policies and conduct activities similar to
those of McAfee.com. NAI shall be free to render such advice and other services,
and McAfee.com hereby consents thereto. NAI shall devote so much of its time and
attention to the performance of its duties under this Agreement as it deems
reasonable or necessary to perform the services required hereunder in a manner
consistent with that in which such services have been performed by NAI in the
past.
ARTICLE VIII
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<PAGE> 7
8.1 NOTICES. All notices and other communications hereunder shall
be in writing and shall be delivered by hand or mailed by registered or
certified mail (return receipt requested) or transmitted by facsimile to the
parties at the following addresses (or at such other addresses for a party as
shall be specified by like notice) and shall be deemed delivered upon personal
delivery, upon actual receipt or on the third business day after deposit in the
mail:
If to NAI:
Networks Associates, Inc.
3965 Freedom Circle
Santa Clara, California 95054
Attn: Prabhat Goyal
If to McAfee.com Corporation:
McAfee.com Corporation
2805 Bowers Avenue
Santa Clara, California 95051
Attn: Evan Collins
8.2. FORCE MAJEURE. Neither party shall be in default of this
Agreement or liable to the other party for any delay or default in performance
where occasioned by any cause of any kind or extent beyond its control,
including but not limited to, armed conflict or economic dislocation resulting
therefrom; embargoes; shortages of labor, raw materials, production facilities
or transportation; labor difficulties; civil disorders of any kind; action of
any civil or military authorities (including priorities and allocations); fires;
floods; and accidents. The dates on which the obligations of a party are to be
fulfilled shall be extended for a period equal to the time lost by reason of any
delay arising directly or indirectly from:
(a) Any of the foregoing causes, or
(b) Inability of that party, as a result of causes beyond its
reasonable control, to obtain instruction or information from
the other party in time to perform its obligations by such
dates.
8.3. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof and
all prior agreements or understandings shall be deemed merged herein. No
representations, warranties and certifications, express or implied, shall exist
as between the parties except as stated herein.
8.4. AMENDMENTS. No amendments, waivers or modifications hereof
shall be made or deemed to have been made unless in writing executed by the
party to be bound thereby.
8.5. SEVERABILITY. If any provision in this Agreement or the
application of such provision to any person or circumstance shall be invalid,
illegal or unenforceable, the remainder of this Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid, illegal or unenforceable shall not be affected thereby.
8.6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute this Agreement.
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<PAGE> 8
8.7. SUCCESSORS AND ASSIGNS. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other party hereto, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
8.8. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California and of the
United States.
8.9. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and should not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without reference to this Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
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<PAGE> 9
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed and operable as of the Effective Date.
BY:
NETWORKS ASSOCIATES, INC. MCAFEE.COM CORPORATION
3965 Freedom Circle 2810 Bowers Avenue
Santa Clara, California 95054 Santa Clara, California 95054
By: /s/ PRABHAT GOYAL By: /s/ SRIVATS SAMPATH
---------------------------- ----------------------------
Name: Prabhat Goyal Name: Srivats Sampath
---------------------------- ----------------------------
Title: Title:
---------------------------- ----------------------------
[SIGNATURE PAGE FOR CORPORATE MANAGEMENT SERVICES AGREEMENT]
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EXHIBIT 10.6
TECHNOLOGY CROSS LICENSE AGREEMENT
This TECHNOLOGY CROSS LICENSE AGREEMENT (this "Agreement") is made and
entered into this 1st day of January, 1999 (the "Effective Date"), by and
between Networks Associates Technology Corp (hereinafter referred to as "NAI"),
a corporation organized and existing under the laws of the State of Delaware,
Networks Associates, Inc., a corporation organized and existing under the laws
of the State of Delaware, doing business in the name of Network Associates,
Inc., and having its principal place of business at 3965 Freedom Circle, Santa
Clara, CA 95054 ("Parent"), and McAfee.com, a corporation organized and existing
under the laws of the State of Delaware and having its principal place of
business at 2805 Bowers Avenue, Santa Clara CA 95051 ("McAfee.com").
RECITALS
WHEREAS, the parties have determined to separate McAfee.com into a
separate, publicly traded company; and
WHEREAS, the parties desire that McAfee.com utilize NAI's copyrights,
trademarks, patents, trade secrets and proprietary rights ("Intellectual
Property Rights"), and that NAI utilize McAfee.com's Intellectual Property
Rights;
WHEREAS, the parties agree that in consideration of the rights granted
each party will agree to limit the party's field of business within the scope of
a permitted business purpose; and
WHEREAS, as a material inducement for McAfee.com to enter into this
Agreement Parent has agreed to act as the guarantor of all NAI's duties,
obligations and liabilities hereunder;
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING AND THE MUTUAL
COVENANTS AND AGREEMENTS CONTAINED HEREIN, THE PARTIES HERETO HEREBY AGREE AS
FOLLOWS:
DEFINITIONS
1.1 "Confidential Information" means all documents, disclosures and
written or oral statements disclosed by a party (the "Disclosing Party") to the
other party (the "Receiving Party") shall be deemed "Confidential Information"
unless clearly marked otherwise or if the information in such documents,
disclosures or statements is non-confidential pursuant to Section 8 below.
Except as provided herein, "Confidential Information" shall include, without
limitation, proprietary, technical, marketing, operating, performance, cost,
business pricing policies, programs, inventions, discoveries, trade secrets,
techniques, processes, computer programming techniques, and all record bearing
media containing or disclosing such information and techniques disclosed
pursuant to this Agreement. Any source code or unlinked object
<PAGE> 2
files or modules disclosed by the Disclosing Party to the Receiving Party shall
be deemed "Confidential Information" unless it is clearly and in writing marked
as "Non-Confidential."
1.2 "Derivative Works" means a derivative work within the meaning of
the Copyright Act of 1976 (as amended) including, without limitation, any
modification, revision, port, translation, abridgment, condensation or expansion
of either the McAfee.com Licensed Product or the NAI Licensed Product (each a
"Licensed Product" as the case may be in context), or any form in which the
Licensed Product is recast, transferred, transformed or adapted, which, if
prepared without the rights granted under this Agreement, would result in
copyright infringement.
1.3 "End User" means a sub-licensor of a software product who
acquires the right to use the software product under a License for single-node,
individual-consumer home office or single-node, individual-small office use only
and not for resale or multi-user usage.
1.4 "EULA(s)" means the End User license agreement(s) to be provided
with each Licensed Product in accordance with the terms of this Agreement.
1.5 "Evaluation" means any distribution of a software product
whereby the user is reviewing, testing or evaluating the software and has a
limited right of use subject to a maximum sixty (60) day non-recurring limited
use EULA.
1.6 "License" means any End-User sub-license whether subscription or
perpetual.
1.7 "Licensee" or "Licensor" means for purposes of this Agreement,
depending upon the context of use, either NAI or McAfee.com shall be identified
as the "Licensee" or "Licensor" of either the NAI Licensed Products or the
McAfee.com Licensed Products.
1.8 "McAfee.com Copyright Claim" means the rights under the
Copyright Act of 1976 (as amended) in and to any McAfee.com Licensed Product,
any Derivative Work thereof created by or for McAfee.com, any Derivative Work
created by or for McAfee.com of an NAI Licensed Product and any work included
therein within the meaning of the Copyright Act of 1976 (as amended), including,
without limitation, any original software, in source or binary format.
1.9 "McAfee.com Permitted Business Purpose" means the Sale or
Licensing of software products to or software services to Permitted OEMs (as
defined in and limited by the license granted in Section 2.2 (a)), and to End
Users solely via the Internet .
1.10 "McAfee.com Licensed Product" means any software product, in
Source Code or Object Code form, purchased, produced or developed using any
method within the scope of a McAfee.com Copyright Claim.
1.11 "McAfee.com Patent Rights" means all patent rights arising out
of all patent applications and all U.S and foreign patent rights issued,
transferred or assigned to McAfee.com, or any subsidiaries, partnerships or
joint ventures of McAfee.com (provided that with respect to such subsidiary,
partnership or joint venture (i) McAfee.com and/or its affiliates own more than
51% of the voting control of such subsidiary, partnership or joint venture; or
(ii) on the date it the patent is issued , products which are the fundamental
object of protection by the patent are competitive with
<PAGE> 3
then existing NAI products), during the Term of this Agreement and all
divisions, continuations, continuations-in-part, and substitutions thereof; all
foreign patent applications corresponding to the preceding applications; and all
U.S. and foreign patents issuing on any of the preceding applications, including
extensions, reissues, and re-examinations.
1.12 "McAfee.com Trademarks" means the trademarks, trade dress, logos
and designs from time to time owned by McAfee.com.
1.13 "McAfee.com Site" means any McAfee.com owned or licensed site(s)
on the World Wide Web.
1.14 "NAI Copyright Claim" means the rights under the Copyright Act
of 1976 (as amended) in and to any NAI Licensed Product, any Derivative Work
thereof created by or for NAI, any Derivative Work of a McAfee.com Licensed
Product created by or for NAI, and any work included therein within the meaning
of the Copyright Act of 1976 (as amended), including, without limitation, any
original software, in source or binary format.
1.15 "NAI Permitted Business Purpose" means any business purpose
other than the McAfee.com Permitted Business Purpose. NAI Permitted Business
Purpose includes, but is not limited to, (i) enterprise-wide, multi-user
Licensing, subscription or Sale of software products or services to third party
businesses through any method of distribution including the World Wide Web, and
(ii) Licensing, subscription or Sale of software products or services to End
Users that is distributed or initiated by any method other than the Internet.
1.16 "NAI Licensed Product" means any software product, in Source
Code or Object Code form, purchased, produced or developed using any method
within the scope of a NAI Copyright Claim.
1.17 "NAI Patent Rights" means all U. S. and foreign patent rights
issued, transferred or assigned to NAI, or any subsidiaries (other than
McAfee.com), partnerships or joint ventures of NAI (provided that with respect
to such subsidiary, partnership or joint venture (i) NAI and/or its affiliates
own more than 51% of the voting control of such subsidiary, partnership or joint
venture; or (ii) on the date it the patent is issued , products which are the
fundamental object of protection by the patent are competitive with then
existing McAfee.com products), during the Term of this Agreement and all
divisions, continuations, continuations-in-part, and substitutions thereof; all
foreign patent applications corresponding to the preceding applications; and all
U.S. and foreign patents issuing on any of the preceding applications, including
extensions, reissues, and re-examinations.
1.18 "NAI Trademarks" means the trademarks, trade dress, logos and
designs from time to time owned by NAI.
1.19 "Net Revenue" means actually recognized revenue derived from any
subscription or service for the Sale or License of any NAI Licensed Product by
McAfee.com, sold as a stand alone product or bundled with other NAI Licensed
Products, McAfee.com Licensed Products or products, or third party products or
services, less any third party, non-NAI royalty payments due and owing, accrued
or recognized, as reasonably determined by McAfee.com.
<PAGE> 4
1.20 "Object Code" means the binary machine-executable form of
computer software programming code, including scripts and HTML pages.
1.21 "Patent Rights" means the McAfee.com Patent Rights or the NAI
Patent Rights, as applicable.
1.22 "Sale" of a product, or to "Sell" a product means the sale,
license, lease, or other transfer or disposition of that product, or to commence
productive use of such product, provided, however, that in no event will Sell or
Sale be deemed to authorize the "first sale" within the meaning of the Copyright
Act of 1976 (as amended) by a person or entity who is not the holder of the
copyright and/or patent right for such product.
1.23 "Source Code" means the human-readable form of computer
programming code and compiled but unlinked object code or unlinked object
modules.
1.24 "Term" has the meaning set forth in Section 9.1.
1.25 "Upgrades" means any update, enhancement, new release or new
version of a software product of a party which (i) is prepared by or for such
party, (ii) is substantially similar to such software product, (iii) is
generally released by such party, and (iv) is marketed under the same product
number and nomenclature as such software product, including, without limitation,
major and minor upgrades to such product, and any functional supersets thereto.
SECTION 2.
TECHNOLOGY LICENSES
2.1 Patent License Grants.
(a) To McAfee.com. Subject to the terms and conditions of
this Agreement, during the Term NAI hereby grants McAfee.com a worldwide,
nonexclusive, nontransferable license under the NAI Patent Rights to make, have
made, import, use, offer for Sale, Sell or License NAI Licensed Products alone
or bundled with other products solely for the McAfee.com Permitted Business
Purpose.
(b) To NAI. Subject to the terms and conditions of this
Agreement, during the Term McAfee.com hereby grants NAI a non-exclusive,
non-transferable license under the McAfee.com Patent Rights to make, have made,
import, use, offer for Sale, Sell or License McAfee.com Licensed Products alone
or bundled with other products and for the NAI Permitted Business Purpose.
(c) Protection. The Licensee under this Section 2.1 agrees
to mark all of the products licensed hereunder that the licensee Sells pursuant
to this Agreement in accordance with the applicable statute or regulations
relating to patent marking in the country or countries of manufacture and sale
thereof.
(d) Ownership. At all times the owner of the patent rights
licensed hereunder will retain ownership of its patent rights and, subject to
the terms hereof, may use and commercialize its own patent rights itself or with
third parties.
<PAGE> 5
2.2 Software License Grants.
(a)(a) To McAfee.com. Subject to the terms and conditions of
this Agreement, during the Term NAI grants to McAfee.com the following
worldwide, nonexclusive (except to the limited extent set forth in Section 2.3,
in which it is exclusive), royalty-bearing and nontransferable licenses, under
NAI's copyrights and trade secrets in and to the NAI Licensed Products and
solely for the McAfee.com Permitted Business Purpose:
(i) To distribute the then current release of the
NAI Licensed Products (A) alone or bundled with McAfee.com Licensed Products or
other products; and to reproduce and use copies of the NAI Licensed Products
therefor; or (B) to third party OEMs for the sole purpose of bundling the NAI
Licensed Products with such third party's products and distributing the bundled
products to End Users ("Permitted OEMs").
(ii) To use, manufacture, reproduce, incorporate,
build, integrate, package or repackage NAI Licensed Products media, alone or
bundled with McAfee.com Licensed Products or other products.
(iii) To sublicense the NAI Licensed Products to End
Users, alone or bundled with McAfee.com Licensed Products or any third party
products.
(iv) To distribute and use NAI Licensed Products for
help desk, development testing, demonstration and internal use purposes on
McAfee.com's computers for technical support, service, training, and sales
promotion, and to copy NAI Licensed Products for such purposes without charge.
(v) To use, reproduce and prepare Derivative Works
of the NAI Licensed Products and to use, reproduce, manufacture, have
manufactured, distribute and sublicense such Derivative Works.
(b) To NAI. Subject to the terms and conditions of this
Agreement, McAfee.com grants to NAI the following worldwide, non-exclusive
(except to the limited extent as set forth in Section 2.3, in which it is
exclusive), royalty-bearing and nontransferable licenses, under McAfee.com's
copyrights and trade secrets in and to the McAfee.com Licensed Products and
solely for the NAI Permitted Business Purpose :
(i) To distribute the McAfee.com Licensed Products:
(A) alone or bundled with NAI Licensed Products or other products; and to
reproduce and use copies of the McAfee.com Licensed Products therefor; and (B)
to third party OEMs for the purpose of bundling the McAfee.com Licensed Products
with such third party's products and distributing the bundled products to End
Users.
(ii) To manufacture, reproduce, incorporate, build,
integrate, package or repackage McAfee.com Licensed Products media, alone or
bundled with NAI Licensed Products or any third party products.
<PAGE> 6
(iii) To sublicense McAfee.com Licensed Products to
End Users, alone or bundled with NAI Licensed Products or other products.
(iv) To distribute and use McAfee.com Licensed
Products for help desk, development testing, evaluation, demonstration and
internal use purposes on NAI's computers for technical support, service,
training, and sales promotion, and to copy McAfee.com Licensed Products for such
purposes without charge.
(c) To use, reproduce and prepare Derivative Works of the
McAfee.com Licensed Products and to use, reproduce, manufacture, have
manufactured, distribute and sublicense such Derivative Works.
2.3 Exclusivity.
(a) During the term of this Agreement, the rights granted by
NAI pursuant to Section 2.2(a) shall be exclusive within the scope of the
McAfee.com Permitted Business Purpose. Such exclusive shall extend to the
actions of NAI. Further, NAI shall not grant to any third party any of the
rights enumerated in Section 2.2 for use within the McAfee.com Permitted
Business Purpose.
(b)(b) During the term of this Agreement, the rights granted by
McAfee.com pursuant to Section 2.2(b) shall be exclusive within the scope of
the NAI Permitted Business Purpose. Such exclusive shall extend to the actions
of McAfee.com. Further, McAfee.com shall not grant to any third party any of the
rights enumerated in Section 2.2 for use within the NAI Permitted
Business Purpose.
2.4 User Documentation. Subject to the terms and conditions of this
Agreement, NAI hereby grants to McAfee.com a worldwide, nonexclusive,
nontransferable license, under NAI's copyrights in and to the User
Documentation, to use and prepare Derivative Works of the User Documentation and
to reproduce and distribute the User Documentation and Derivative Works thereof
prepared pursuant to this Section 2.4, to End Users in connection with the
permitted distribution of NAI Licensed Products.
2.5 Bugs Reports and Bug Fixes. Each party as Licensee will from
time to time provide to the Licensor available information regarding bugs or
errors in the Licensor's products, and with any fixes or corrections to such
bugs or errors that it may develop for such products in Source Code form. Upon
delivery, such bug fixes and error corrections shall be considered "NAI Licensed
Products" or "McAfee.com Licensed Products" as applicable for purposes of this
Agreement. The Licensee will include with such Source Code deliveries a
description of the bug or error as available.
2.6 Enhancements; Derivative Works. Each party will retain all
right, title and interest in and to any modifications or Derivative Works it
creates with respect to its own or the other party's Licensed Products. The
creating party will promptly provide to the other party any such modifications
to or Derivative Works (in Source Code form) arising out of the other party's
Licensed Products. Upon delivery, such modifications and Derivative Works shall
be and hereby are licensed to the other party pursuant to the terms of Section
2.2(a) or (b) as appropriate; provided, however the Licensee under this Section
2.6 shall pay a royalty with respect to such modifications of Derivative Works
as set forth in
<PAGE> 7
Section 6. Except as expressly set forth herein the respective party as Licensor
shall not have a duty or obligation to support the Derivative Works provided to
the other party as Licensee.
2.7 No Implied Rights. Only the licenses granted pursuant to the
express terms of this Agreement shall be of any legal force or effect. No other
license rights shall be granted or created by implication, estoppel or
otherwise.
2.8 Mutual Exclusive Use. Nothing in this Agreement shall be deemed
to prohibit either party from selling, using, marketing, distributing products
or technology, or otherwise engaging in any commercial activities outside their
respective Permitted Business Purpose, other than with respect to such
activities involving the McAfee.com Licensed Products and NAI Licensed Products,
respectively. Notwithstanding the foregoing, for the Term of this Agreement,
each party agrees that it shall not market, license, sell or distribute to any
third party any products that, at the time such activities commenced,
substantially replicated the functionality of and was competitive with any
product(s) that the other party generally made available to its customers.
SECTION 3.
DELIVERY; DISTRIBUTION
3.1 Notice/Shipment. NAI shall deliver master disks or CD-ROMs
containing the NAI Licensed Products promptly after the Effective Date.
Thereafter, within thirty (30) days of either party developing any McAfee.com
Licensed Products or NAI Licensed Products hereunder or Upgrades thereto, such
party shall notify the other party of such development and shall promptly
deliver master disks or CD-ROMs containing the McAfee.com Licensed Products or
the NAI Licensed Products to the other party in Source Code and Object Code
form.
3.2 Packaging and Distribution. Software products of either party
may be packaged and distributed by each respective party in any format, provided
such packaging and distribution is in conformity with the party's respective
permitted business purpose.
3.3 EULA. In all cases, McAfee.com shall distribute each Licensed
Product to End Users with the then current EULA provided by NAI for each such
Licensed Product, a copy of which is attached hereto as Exhibit D; provided,
however, the parties will negotiate in good faith to determine the level of end
user support granted in each such EULA for a period of sixty (60) days following
the Effective Date of this Agreement. If the parties are unable to agree on
support provisions after such sixty (60)-day period, the support provision shall
be a one-year term of maintenance and support including telephone support and
updates generally provided by the parties to their end user customers. NAI may
from time to time modify or replace its EULA, subject to McAfee.com's approval
of the support provisions. NAI shall consult with McAfee.com regarding any other
such modification or replacement as soon as practicable, and to consider
reasonable comments made by McAfee.com.
SECTION 4
PROPRIETARY RIGHTS
<PAGE> 8
4.1 NAI Proprietary Rights. Title to and ownership of all copies of
the NAI Licensed Products, whether in machine-readable or printed form, and all
Intellectual Property Rights therein, and all Derivative Works thereof created
by or on behalf of NAI and all Intellectual Property Rights therein, are and
shall remain the exclusive property of NAI. McAfee.com shall not take any action
to jeopardize, limit or interfere in any manner with NAI's ownership of and
rights with respect to the NAI Licensed Products. McAfee.com shall have only
those rights in or to the NAI Licensed Products granted to it pursuant to this
Agreement.
4.2 McAfee.com Proprietary Rights. Title to and ownership of all
copies of the McAfee.com Licensed Products, whether in machine-readable or
printed form, and all Intellectual Property Rights therein, and all Derivative
Works thereof created by or on behalf of McAfee.com and all Intellectual
Property Rights therein, are and shall remain the exclusive property of
McAfee.com. NAI shall not take any action to jeopardize, limit or interfere in
any manner with McAfee.com's ownership of and rights with respect to the
McAfee.com Licensed Products. NAI shall have only those rights in or to the
McAfee.com Licensed Products granted to it pursuant to this Agreement.
4.3 Proprietary Notices. Neither party shall remove or alter any
copyright or other proprietary patent notices of the other party, appearing on
or in copies of any of the respective Licensed Products licensed from the other
party, including the NAI Licensed Products delivered to McAfee.com by NAI or the
McAfee.com Licensed Products delivered to McAfee.com by NAI. Each portion of any
such material reproduced by such party shall include the copyright or patent
notice or notices appearing in or on the corresponding portion of such materials
as delivered by the other party. Notwithstanding the foregoing, at Licensing
NAI's election, McAfee.com shall refrain from including an NAI copyright notice
in the published version of the user documentation for the McAfee.com Licensed
Products.
SECTION 5.
INTELLECTUAL PROPERTY PROSECUTION AND ENFORCEMENT
5.1 Licensee's Responsibilities. Each party as Licensor hereunder
shall have the sole right to control the preparation, filing, prosecution and
maintenance with respect to its own Patent Rights, and any interference or
opposition proceeding relating thereto, using patent counsel of its choice.
5.2 Cross License Grants.
(a) NAI hereby grants to McAfee.com, subject to the terms
and conditions set forth herein, the non-exclusive, non-transferable right and
license to use the NAI Trademarks (i) to design and have designed the NAI
Licensed Products, (ii) to manufacture and have manufactured the NAI Licensed
Products, (iii) to import, distribute, display and Sell the NAI Licensed
Products, and (iv) to advertise, promote and market the NAI Licensed Products.
(b) McAfee.com hereby grants to NAI, subject to the terms
and conditions set forth herein, the non-exclusive, non-transferable right and
license to use the McAfee.com Trademarks (i) to design and have designed the
McAfee.com Licensed Products, (ii) to manufacture and have manufactured the
McAfee.com Licensed Products, (iii) to import, distribute, display and Sell the
McAfee.com Licensed Products, and (iv) to advertise, promote and market the
McAfee.com Licensed Products.
<PAGE> 9
5.3 Rights to Trademarks. Each party's use of the other party's
trademarks hereunder shall inure exclusively to the benefit of the Licensor, and
the Licensee shall not acquire or assert any rights therein. The Licensee will
not challenge the Licensor's ownership of or the validity of the Licensor's
trademarks or any application for registration thereof throughout the world. The
Licensee agrees that it shall not during the Term of this Agreement or
thereafter, register or apply to register any of the Licensor's trademarks, or
any similar or derivative mark, anywhere in the world. The Licensee agrees,
during the Term of this Agreement and thereafter, never to contest the rights of
the Licensor in the Licensor's trademarks.
5.4 Protection of Trademarks. The Licensee shall assist the
Licensor, at Licensor's request and expense, in protection and maintenance of
the Licensor's Trademarks. In connection therewith, the Licensee shall, without
limitation, execute and deliver to the Licensor in such form as it may
reasonably request, all instruments necessary to (i) effectuate copyright and
trademark protection, (ii) record the Licensee as a registered user of any of
the Licensor's trademarks pursuant to this Agreement, or (iii) cancel any such
registration. If the Licensor fails or refuses to take reasonable steps to
procure, protect and maintain the Licensor's intellectual property rights in the
Licensor's trademarks, the Licensee may, at Licensor's expense, take reasonable
steps on the Licensor's behalf. The Licensee will use the Licensor's trademarks
in compliance with all applicable legal requirements, and the Licensee shall
cause to appear on all of Licensor's licensed products, and all materials, such
legends, markings and notices as may be required by applicable law.
5.5 Quality Standards. The Licensee undertakes that the design and
development of the Licensor's products as well as all advertising, promotions or
other materials of any and all types prepared in connection with the Licensor's
trademarks and the Licensor's licensed products shall be of a style, appearance
and quality commensurate with the Licensee's other products. All use of the
Licensor's trademarks and Licensor's Licensed Products shall be subject to
approval by the Licensor for conformity with the Licensor's then-current
trademark guidelines. McAfee.com shall use the "VirusScan" trademark or such
other of NAI's trademarks as NAI directs in connection with any virus detection
and cleaning technology provided by NAI hereunder (the "NAI Virus Mark"). Any
bundled product of McAfee.Com that includes any virus detection and cleaning
technology provided by NAI hereunder shall contain a reasonably prominent NAI
Virus Mark. The Licensor may at any time upon reasonable notice inspect any use
of the Licensor's Trademarks, even if previously approved. If the Licensor
determines that the Licensee is using the Licensor's Trademarks improperly, the
Licensor shall notify the Licensee, and the Licensee shall use its best efforts
to remedy the improper use within two (2) business days following receipt of
such notice. Licensee's use of the Licensor's Trademarks in a manner
inconsistent with this Agreement or inconsistent with any trademark guidelines
supplied by the Licensor to the Licensee shall constitute a Dispute within the
meaning of Section 13 hereof. The Licensee shall not harm, misuse or bring into
disrepute the Licensor's Trademarks.
5.6 Enforcement. If either party as Licensee hereunder becomes aware
that any Intellectual Property Rights of the other party are being or have been
infringed by any third party, Licensee shall promptly notify the Licensor in
writing describing the facts relating thereto in reasonable detail.
5.7 Infringement Claims.
<PAGE> 10
(a) Indemnification by Licensor. Licensor shall defend,
indemnify and hold harmless the Licensee and its officers, directors, employees,
shareholders, customers, agents, successors and assigns from and against any and
all loss, damage, settlement or expense, including legal expenses and costs of
investigation, as incurred ("Losses"), resulting from or arising out of any
claim in the United States or in any country which is a signatory to the Berne
Convention on Copyright which alleges that any licensed product provided to the
Licensee hereunder or the use thereof infringes upon, misappropriates or
violates any patents, copyrights, trademarks or trade secret rights or other
proprietary rights of persons, firms or entities who are not parties to this
Agreement. As a condition to such defense and indemnification, the Licensee will
provide Licensor with prompt written notice of the claim and permit Licensor to
control the defense, settlement, adjustment or compromise of any such claim,
provided the Licensee shall reasonably cooperate in the defense of such action
at Licensor's expense. No settlement that prevents the Licensee from continuing
to use the licensed product will be made without the Licensee's prior written
consent unless the Licensor procures for the Licensee the right to continue
using the licensed product, or replaces or modifies the licensed product so that
it becomes non-infringing. The Licensee may employ counsel at its own expense to
assist it with respect to any such claim; provided, however, that if such
counsel is necessary because of a conflict of interest of either Licensor or its
counsel or because Licensor does not assume control, Licensor will bear the
expense of such counsel. The Licensee shall have no authority to settle any
claim on behalf of Licensor.
(b) Licensor's Efforts. If the licensed product, in whole or
in party, are or in Licensor's opinion may become, the subject of any claim,
suit or proceeding for infringement of, or it is judicially determined that the
licensed product, in whole or in party, infringes any third party's Intellectual
Property Right, or if the licensed product's use is enjoined, then the Licensor
may, at its option and expense, and using reasonable efforts to act as soon as
possible: (1) procure for the Licensee the right to continue use of the licensed
product; (2) replace or modify the licensed product so as not to infringe such
third party's Intellectual Property Right while conforming, as closely as
possible, to the specifications agreed upon by the parties, (3) if the parties
mutually agree, the Licensee may undertake to replace or modify the licensed
product so as not to infringe such third party's Intellectual Property Right and
such work shall be reimbursed by Licensor at a mutually agreeable fee structure.
If Licensor is unable to achieve either of the foregoing within thirty (30) days
(or such longer period as determined by the Licensee in good faith) after a
determination by a court of competent jurisdiction of infringement or the entry
of an injunction, as applicable, Licensor shall promptly refund to the Licensee
the license fees paid for any licensed product the use of which is legally
prohibited.
5.8 Exceptions to Licensor Indemnity. Licensor shall have no
obligation under Section 5 to the extent any claim of infringement or
misappropriation results from (i) use of the Licensed Product in combination
with any other product, end item, or subassembly not intended by Licensor, or
(ii) the fact that the infringement would not have occurred but for such
combination, incorporation or use.
5.9 Limitation on Indemnity. This Section 5 shall represent the
entire and exclusive obligation of Licensor to Licensee regarding any claim that
the licensed product infringes the Intellectual Property Rights of a third
party.
<PAGE> 11
SECTION 6.
ROYALTY PAYMENTS
6.1 Royalties.
(a) McAfee.com. In consideration for the license and rights
granted herein, McAfee.com shall pay to NAI running royalties on Net Revenue of
the NAI Licensed Products Distributed by McAfee.com at the rates set forth in
Exhibit A. "Distributed" shall refer to a purchase by an End User of a license
to an NAI Licensed Product within the McAfee.com Permitted Business either
alone, or bundled with other NAI Licensed Products, McAfee.com Licensed Products
or products, or any third party products. Nothing herein shall be construed to
subject to the foregoing royalty any revenue or other consideration received by
McAfee.com with respect to subscription licenses, services, advertising,
sponsorships, co-hosting and other e-commerce arrangements that do not include
NAI Licensed Products.
(b) NAI. For the Term of this Agreement, in consideration
for the license and rights granted herein (including but not limited to those
set forth in Section 2.6), NAI shall pay to McAfee.com a quarterly royalty of
two hundred and fifty thousand dollars ($250,000), whether or not any new
Derivative works or other technology were actually made subject to the licenses
set forth herein during any given quarter.
6.2 Payments. Within thirty (30) days of the last day of each
calendar quarter, McAfee.com shall deliver to NAI a written statement (a
"Royalty Statement") showing the number of NAI Licensed Products distributed by
McAfee.com during the immediately preceding quarter, the Net Revenue calculated
for such quarter and the aggregate royalties payable to NAI for such quarter.
Along with such Royalty Statement, McAfee.com shall pay NAI all amounts due to
NAI pursuant to such Royalty Statement. NAI shall pay the royalty payment set
forth in Section 6.1(b), without demand or invoice from McAfee.com, within
thirty (30) days of the last day of the immediately preceding quarter for which
the royalty applied.
6.3 Inspection Rights. McAfee.com shall maintain during the Term and
for a period of three (3) years thereafter, true and complete books of account
containing an accurate record of all data necessary for the verification of
royalties due to NAI under this Agreement, and NAI and its representatives shall
have the right to examine such books at all reasonable times (but no more than
once per quarter) upon no less than ten (10) days' advance notice to McAfee.com.
Such examination shall be made during normal business hours at the principal
place of business of McAfee.com. In the event that any such examination reveals,
for any period, an underpayment of royalties to NAI by an amount greater than
five percent (5%) of the amount actually due NAI, McAfee.com shall promptly
reimburse NAI for all costs and expenses associated with such examination.
6.5 Support. Subject to NAI's then-current fees (but in no event
greater than NAI's allocated cost plus ten percent), NAI or its reasonably
acceptable designee will provide to End Users all front-line and back-line
technical support for NAI Licensed Products (including beta releases) and
McAfee.com Licensed Products distributed by McAfee.com hereunder, including
assistance with installation, configuration and media. The support terms which
NAI, as of the Effective Date, expects to use are as
<PAGE> 12
set forth in Exhibit E. Such terms may only be revised as NAI and McAfee.com
mutually deem appropriate. McAfee.com agrees that any user documentation
prepared by McAfee.com for NAI Licensed Products and McAfee.com Licensed
Products will clearly and conspicuously state that End Users should call NAI or
its designee for technical support for the NAI Licensed Products and the
McAfee.com Licensed Products. In addition, NAI will use all reasonable efforts
to negotiate with its third party provider(s) of back end support to offer such
support to McAfee.com under the existing contract(s) with such third party
provider(s). If NAI is unable to so include McAfee.com then McAfee.com shall
procure its own back-end support with respect to the subject matter of this
agreement. NAI or its designee (which may be McAfee.com, upon agreement by the
parties) will provide to End Users all front-line and back-line technical
support for the NAI Licensed Products other than those distributed by McAfee.com
hereunder, including assistance with installation, configuration and media.
THIRD PARTY RIGHTS; ASSIGNMENT OF CONTRACTS
7.1 Third Party Rights.
(a) Each party shall use reasonable efforts to grant to the
other, at the other's sole cost, a sublicense to the other party under the
licensing party's rights in any rights such party obtains with respect to third
party products during the Term (the "Third Party Rights"). In the event the
licensing party is unable for any reason to grant the other party such a
sublicense, including without limitation restrictions on sublicensing or
disapproval by the third party licensor, the licensing party shall use
reasonable efforts to assist the other party, at the other party's sole cost, to
acquire a non-exclusive license to use the Third Party Rights from the third
party licensor of such rights.
(b) All of the Third Party Rights that are sublicensed to a
party hereunder will be subject to payment by such party of a portion of the
license fees and/or royalty obligations paid or payable thereunder as reasonably
agreed upon by the parties in their good faith business judgment. The
sublicensee will be solely responsible for any sublicense fee imposed by the
owner of such Third Party Rights as a condition to consent to such sublicense;
provided that the sublicensee will have the right to advance notification of
such fee and the right to decline such sublicense.
SECTION 8.
CONFIDENTIALITY
8.1 Confidential Information. Except as expressly provided herein,
the parties agree that, for the term of this Agreement and for five (5) years
thereafter (ten (10) when such Confidential Information includes Source Cose),
the receiving party shall keep completely confidential and shall not publish or
otherwise disclose and shall not use for any purpose except for the purposes
contemplated by this Agreement any Confidential Information furnished to it by
the disclosing party hereto, except that to the extent that it can be
established by the receiving party by written proof that such Confidential
Information: was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure;
<PAGE> 13
(a) was generally available to the public or otherwise part
of the public domain at the time of its disclosure to the receiving party;
(b) became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; or
(c) was subsequently lawfully disclosed to the receiving
party by a person other than a party hereto.
8.2 Permitted Use and Disclosures. Each party hereto may use or
disclose information disclosed to it by the other party to the extent such use
or disclosure is reasonably necessary in complying with any applicable law or
governmental regulations including but not limited to the Securities Act of 1933
and the Securities Exchange Act of 1934, or exercising its rights hereunder to
develop or commercialize Licensed Products, provided that if a party is required
to make any such disclosure of another party's confidential information, other
than pursuant to a confidentiality agreement, it will give reasonable advance
notice to the latter party of such disclosure and, will use its best reasonable
efforts to secure confidential treatment of such information prior to its
disclosure (whether through protective orders or otherwise). Notwithstanding the
foregoing, disclosures of Source Code licensed from the other party under demand
from a court ordered subpoena shall be permitted provided such disclosure is
made under a "For Your Eyes Only" disclosure only to attorneys or members of the
court and specifically not disclosed to competitors of NAI or McAfee.com.
TERM AND TERMINATION
9.1 License Period. The term of this Agreement will commence on the
Effective Date of this Agreement and will remain in full force and effect in
perpetuity unless earlier terminated in accordance with this Section 9 (the
"Term").
9.2 Termination by Mutual Agreement. This Agreement may be
terminated pursuant to the mutual, written agreement of the parties.
9.3 Termination for Insolvency. This Agreement may be terminated by
either party, upon written notice to the other party, (i) upon the institution
by or against the other party of insolvency, receivership or bankruptcy
proceedings or any other proceedings for the settlement of the other party's
debts, (ii) upon the other party's making an assignment for the benefit of
creditors, or (iii) upon the other party's dissolution, winding up or ceasing to
conduct business in the normal course.
9.4 Termination for Default. Either party may terminate this
Agreement for the substantial breach by the other party of a material term. The
terminating party shall first give the other party written notice of the alleged
breach and a reasonable period of at least thirty (30) days in which to cure the
alleged breach. If a cure is not achieved during the cure period, then the
parties shall enter into the dispute resolution procedures specified in Section
13. Neither party shall be precluded from seeking temporary equitable remedies.
<PAGE> 14
9.5 Termination upon Merger. This Agreement and all licenses granted
herein shall terminate immediately prior to the effective time of any merger of
McAfee.com and NAI, or upon the merger of McAfee.com with any Affiliate of NAI.
For purposes of the foregoing, "Affiliate" shall mean any corporation,
partnership, joint venture or other entity or person of which NAI has direct or
indirect beneficial ownership of fifty percent (50%) or more of the voting
interests (representing the right to vote for the election of directors or other
managing authority). Notwithstanding the foregoing, this Section 9.5 shall not
be deemed effective (1) in the event any McAfee.com common stock is (or has been
within the previous twenty four (24) months) publicly traded on the NASDAQ
National Market or the New York Stock Exchange; or (2) in the event that third
party or parties have in the immediately preceding twenty four (24) months
purchased any preferred stock, common stock or other equity security (or any
instrument convertible into any equity security) of McAfee.com ("Third Party
Equity") and the aggregate purchase price paid for all such Third Party Equity
exceeds thirty million dollars ($30,000,000) at a pre-money valuation equal to
or in excess of three hundred million dollars ($300,000,000).
9.6 [Intentionally Omitted]
9.7 [Intentionally Omitted]
9.8 Effect of Termination.
(a) Termination of this Agreement for any reason shall not
release any party hereto from any liability which, at the time of such
termination, has already accrued to the other party or which is attributable to
a period prior to such termination nor preclude either party from pursuing any
rights and remedies it may have hereunder or at law or in equity with respect to
any breach of this Agreement. It is understood and agreed that monetary damages
may not be a sufficient remedy for any breach of this Agreement and that the
non-breaching party may be entitled to injunctive relief as a remedy for any
such breach. Such remedy shall not be deemed to be the exclusive remedy for any
such breach of this Agreement, but shall be in addition to all other remedies
available at law or in equity.
(b) Upon any termination of this Agreement, each of
McAfee.com and NAI shall promptly return to the other party all of such other
party's Confidential Information.
(c) In the event this Agreement is terminated for any
reason, each party shall have the right to Sell or otherwise dispose of the
stock of any of the other party's products licensed hereunder then on hand until
six (6) months after such termination, subject to the applicable terms of this
Agreement.
(d) All licenses granted hereunder shall terminate upon the
termination of this Agreement.
9.9 Survival. Notwithstanding the termination of this Agreement, all
EULAs that have been granted under this Agreement prior to termination shall
survive, subject to the continued compliance of each End User with the terms and
conditions of the applicable EULA. The provisions of Sections 1, 4, 9, 10.8,
10.9, 12, 13 and 15 shall survive the expiration or termination of this
Agreement for any reason.
<PAGE> 15
All other rights and obligations of the parties shall cease upon expiration or
termination of this Agreement.
SECTION 10.
REPRESENTATIONS AND WARRANTIES
10.1 General. McAfee.com and NAI each represents and warrants to the
other that:
(a) it is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation set forth
above and is duly qualified and authorized to do business as a foreign
corporation in good standing in all jurisdictions in which the nature of its
assets or business requires such qualification;
(b) it has full right, power and authority to enter into
this Agreement and to perform all of its obligations hereunder;
(c) its execution, delivery and performance of this
Agreement have been duly and properly authorized by all necessary actions and
this Agreement constitutes its valid and binding obligation, enforceable against
it in accordance with its terms; and
(d) its execution, delivery and performance of this
Agreement will not, with or without the giving of notice or passage of time, or
both, conflict with, or result in a default or loss of rights under, any
provision of its certificate of incorporation or by-laws or any other material
agreement or understanding to which it is a party or by which it or any of its
material properties may be bound.
10.2 Disclaimer. Nothing in this Agreement is or shall be construed
as:
(e) A warranty or representation by either party as to the
validity or scope of any claim or patent within such party's Patent Rights;
(f) Subject to Sections 5 and 11, a warranty or
representation that anything made, used, Sold, or otherwise disposed of under
any license granted in this Agreement is or will be free from infringement of
any patent rights, trademarks or other Intellectual Property Right of any third
party; or
(g) Granting by implication, estoppel, or otherwise any
licenses or rights under patents or other rights of such party or third parties,
regardless of whether such patents or other rights are dominant or subordinate
to any patent within such party's Patent Rights.
10.3 No Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN
NEITHER NAI NOR MCAFEE.COM GRANTS ANY WARRANTIES WITH RESPECT TO THE RIGHTS
GRANTED HEREUNDER, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY
STATUTE OR OTHERWISE, AND NAI AND MCAFEE.COM SPECIFICALLY DISCLAIM ANY EXPRESS
OR IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
VALIDITY OF THE PATENT RIGHTS GRANTED HEREUNDER OR NON-INFRINGEMENT.
SECTION 11.
<PAGE> 16
INDEMNIFICATION
11.1 Indemnification. Each party (an "Indemnifying Party") agrees to
indemnify, defend and hold the other party (an "Indemnified Party") and its
directors, officers, employees and agents harmless from and against any and all
liabilities, claims, demands, expenses (including, without limitation, attorneys
and professional fees and other costs of litigation), losses or causes of action
(each, a "Liability") arising out of or relating in any way to (i) the
possession, manufacture, use, sale or other disposition of the Indemnified
Party's licensed products, whether based on breach of warranty, negligence,
product liability or otherwise, (ii) the exercise of any right granted to the
indemnifying Party pursuant to this Agreement, or (iii) any breach of this
Agreement by the Indemnifying Party, except to the extent, in each case, that
such Liability is caused by the gross negligence or willful misconduct of the
Indemnified Party as determined by a court of competent jurisdiction.
11.2 Process of Indemnification. The Indemnified Party will give
prompt notice to the Indemnifying Party of any Liability with respect to which
the Indemnified Party seeks indemnification. The Indemnifying Party shall
assume, at its sole cost and expense, the defense of such Liability. The
Indemnifying Party shall not, without consent of the Indemnified Party (which
consent shall not be unreasonably withheld), effect any settlement or discharge
or consent to the entry of any judgment, unless such settlement or judgment
includes as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnified Party of a general release from all liability in
respect of such Liability.
SECTION 12.
LIMITATION OF LIABILITY
12.1 Exclusion and Limitation of Damages. IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF
THIS AGREEMENT OR THE USE OR DISTRIBUTION OF LICENSED SOFTWARE BY NAI,
MCAFEE.COM OR ANY THIRD PARTY, WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING
NEGLIGENCE), INDEMNITY, PRODUCT LIABILITY OR OTHERWISE.
SECTION 13.
DISPUTE RESOLUTION
13.1 Dispute Resolution. Any dispute, controversy, claim or
disagreement between the parties hereto arising from, relating to or in
connection with this Agreement, any agreement, certificate or other document
referred to herein or delivered in connection herewith, or the relationship of
the parties hereunder or thereunder, including questions regarding the
interpretation, meaning or performance of this Agreement, and including claims
based on contract, tort, common law, equity, statute, regulation, order or
otherwise ("Dispute") shall be resolved in accordance with this Section 13.
13.2 Dispute Review; Mediation.
<PAGE> 17
a) Level 1 Dispute Review. Upon the written request of either
party, NAI and McAfee.com shall each appoint a designated
representative whose task shall be to meet the other party's
designated representative (by conference telephone call or in
person at a mutually agreeable site) in an endeavor to resolve
any Dispute ("Level 1 Dispute Review"). The designated
representatives shall meet as often as the parties reasonably
deem necessary to discuss the Dispute and negotiate in good
faith in an effort to resolve the Dispute without the necessity
of any formal proceeding.
b) Level 2 Dispute Review. If resolution of the Dispute cannot be
resolved within the earlier of (a) fifteen (15) days of the
first Level 1 Dispute Review meeting and (b) such time as when
either party gives the other notice of an impasse ("Level 1
Dispute Termination Date"), a chief executive officer (or a
functional equivalent) of each party shall meet (by conference
telephone call or in person at a mutually agreeable site) within
72 hours after the Level 1 Dispute Termination Date for the
purpose of resolving such unresolved Dispute ("Level 2 Dispute
Review").
13.3 Submission of Dispute to Mediation. If the parties are unable to
resolve the Dispute within a reasonable period after commencement of the Level 2
Dispute Review, the parties shall give each other notice of the existence of a
continuing impasse (the date on which both parties are in receipt of such
notice, the "Level 2 Dispute Termination Date") and shall thereafter immediately
submit the Dispute to mediation in accordance with the Commercial Mediation
Rules of the American Arbitration Association ("AAA") and shall bear equally the
costs of the mediation. The parties will act in good faith to jointly appoint a
mutually acceptable mediator, seeking assistance in such regard from the AAA
within fifteen (15) days of the Level 2 Termination Date. The parties agree to
participate in good faith in the mediation and negotiations related thereto for
a period of thirty (30) days commencing with the selection of the mediator and
any extension of such period as mutually agreed to by the parties.
13.4 Arbitration.
a) If the parties cannot agree to a mediator within fifteen (15)
days of the Level 2 Dispute Termination Date or if the Dispute
is not resolved within thirty (30) days after the beginning of
the mediation and any extension of such periods as mutually
agreed to by the parties, the Dispute shall be submitted to, and
finally determined by, binding arbitration in accordance with
the following provisions of this Section 13.4, regardless of the
amount in controversy or whether such Dispute would otherwise be
considered justiciable or ripe for resolution by a court or
arbitration panel.
b) Any such arbitration shall be conducted by the AAA in accordance
with its current Commercial Arbitration Rules (the "AAA Rules"),
except to the extent that the AAA Rules conflict with the
provisions of this Agreement in which event the provisions of
this Agreement shall control.
c) The arbitration panel (the "Panel") shall consist of three
neutral arbitrators ("Arbitrators"), each of whom shall be an
attorney having eight (8) or more years experience in the
primary area of law as to which the Dispute relates, and shall
be appointed in accordance with the AAA Rules ("Basic
Qualifications").
<PAGE> 18
d) Should an Arbitrator refuse or be unable to proceed with
arbitration proceedings as called for by this Section 14, a
substitute Arbitrator possessing the Basic Qualifications shall
be appointed by the AAA. If an Arbitrator is replaced after the
arbitration hearing has commenced, then a rehearing shall take
place in accordance with the provisions of this Agreement and
the AAA Rules.
e) The arbitration shall be conducted in San Francisco, CA;
provided that the Panel may from time to time convene, carry on
hearings, inspect property or documents and take evidence at any
location which the Panel deems appropriate.
f) The Panel may in its discretion order a pre-exchange of
information including production of documents, exchange of
summaries of testimony or exchange of statements of position and
shall schedule promptly all discovery and other procedural steps
and otherwise assume case management initiative and control to
effect an efficient and expeditious resolution of the Dispute.
g) At any oral hearing of evidence in connection with any
arbitration conducted pursuant to this Agreement, each party and
its legal counsel shall have the right to examine its witnesses
and to cross-examine the witnesses of the other party. No
testimony of any witness shall be presented in written form
unless the opposing parties shall have the opportunity to
cross-examine such witness, except as the parties otherwise
agree in writing and except under extraordinary circumstances
where, in the opinion of the Panel, the interests of justice
require a different procedure.
h) Within fifteen (15) days after the closing of the arbitration
hearing, the Panel shall prepare and distribute to the parties a
written award, setting forth the Panel's findings of facts and
conclusions of law relating to the Dispute, including the
reasons for the giving or denial of any requested remedy or
relief. The Panel shall have the authority to award any remedy
or relief that a court of competent jurisdiction could order or
grant, and shall award interest on any monetary award from the
date that the loss or expense was incurred by the successful
party. In addition, the Panel shall have the authority to decide
issues relating to the interpretation, meaning or performance of
this Agreement, any agreement, certificate or other document
referred to herein or delivered in connection herewith, or the
relationships of the parties hereunder or thereunder, even if
such decision would constitute an advisory opinion in a court
proceeding or if the issues would otherwise not be ripe for
resolution in a court proceeding, and any such decision shall
bind the parties in their performance of this Agreement and such
other documents.
i) Except as necessary in court proceedings to enforce this
arbitration provision or an award rendered hereunder, or to
obtain interim relief, or in connection with an initial public
offering or securities filing, or to legal counsel of the
parties, no party nor any arbitrator shall disclose the
existence, content or results of any arbitration conducted
hereunder without the prior written consent of the other
parties.
j) To the extent that the relief or remedy granted in an award
rendered by the Panel is relief or a remedy on which a court
could enter judgment, a judgment upon the award rendered by the
Panel may be entered in any court having jurisdiction thereof.
Otherwise, the award shall be binding on the parties in
connection with their obligations under this Agreement and in
any subsequent arbitration or judicial proceedings among any of
the parties.
<PAGE> 19
k) The parties agree to share equally the cost of any arbitration,
including the administrative fee, the compensation of the
arbitrators and the costs of any neutral witnesses or proof
produced at the direct request of the Panel.
l) Notwithstanding the choice of law provision set forth in Section
14.1, The Federal Arbitration Act, 9 U.S.C. Section Section
Sections 1 to 14, except as modified hereby, shall govern the
enforcement of this Agreement.
13.5 Recourse to Courts and Other Remedies. Notwithstanding the
Dispute resolution procedures contained in this Agreement, any party may apply
to any court having jurisdiction (a) to enforce this Agreement to arbitrate, (b)
to seek provisional injunctive relief so as to maintain the status quo until the
arbitration award is rendered or the Dispute is otherwise resolved, (c) to avoid
the expiration of any applicable limitation period, (d) to preserve a superior
position with respect to other creditors, or (e) to challenge or vacate any
final judgment, award or decision of the Panel that does not comport with the
express provisions of this Agreement.
SECTION 14.
MISCELLANEOUS PROVISIONS
14.1 Governing Law. This Agreement and any dispute arising from the
performance or breach hereof shall be governed by and construed and enforced in
accordance with the laws of the state of California, without reference to
conflicts of laws principles.
14.2 Independent Contractors. The relationship of NAI and McAfee.com
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (i) give either party the
power to direct and control the day-to-day activities of the other, (ii)
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint undertaking, or (iii) allow either party to create or
assume any obligation on behalf of the other party for any purpose whatsoever.
Except as expressly set forth herein, all financial and other obligations
associated with each party's activities hereunder shall be the sole
responsibility of such party.
14.3 Notices. All notices between NAI and McAfee.com shall be in
writing and delivered by hand or by certified mail, return receipt requested,
addressed to McAfee.com or NAI at the respective addresses set forth below, and
shall be effective upon receipt. Any person entitled to notice hereunder may
change its address by giving written notice to all others entitled to notice.
NOTICES TO NAI WILL BE ADDRESSED TO:
Network Associates, Inc.
3965 Freedom Circle
Santa Clara, CA 95054
Attn: Vice President of Legal Affairs
NOTICES TO MCAFEE.COM WILL BE ADDRESSED TO:
<PAGE> 20
McAfee.com
2805 Bowers Avenue
Santa Clara, CA 95051
Attn: Chief Financial Officer
14.4 10.2 Patent Marking. Each party agrees to mark all Licensed
Products sold pursuant to this Agreement in accordance with the applicable
statute or regulations relating to patent marking in the country or countries of
manufacture and sale thereof.
14.5 Force Majeure. Failure on the part of either party hereto to
meet any of the terms and conditions contained herein because of any
governmental restriction, strike or major labor disturbance, war, revolution,
riot, earthquake, fire, or flood shall not constitute a breach of this Agreement
and shall excuse the party involved from any action by the other party hereto,
based upon the said failure to perform.
14.6 Waiver; Entire Agreement; Partial Invalidity. In the event
either party shall at any time waive any of its rights under this Agreement or
waive the performance by the other party of any of its obligations hereunder,
such waiver shall not be construed as a continuing waiver of the same rights or
obligations or a waiver of any other rights or obligations. This Agreement
(which includes the Exhibits hereto) constitutes the entire agreement between
the parties as to the subject matter hereof and merges and supersedes all prior
discussions between the parties as to the subject matter hereof. This Agreement
may not be changed or terminated except by a written amendment signed by both
parties. Any provision of this Agreement that shall be or is determined to be
invalid shall be ineffective, but such invalidity shall not affect the remaining
provisions hereof. The titles to the paragraphs hereof are for convenience only
and have no substantive effect. This Agreement has been prepared jointly by the
parties and shall not be construed against one party as the draftsman thereof.
14.7 Non-Assignability and Binding Effect. Neither party shall,
without the prior written consent of the other party, transfer or assign this
Agreement in whole or in part, whether by operation of law or otherwise, to any
third party (including affiliated companies) without the prior written consent
of the other party. Any purported transfer or assignment without such consent
shall be void ab initio. Subject to the foregoing, this Agreement will inure to
the benefit of the parties and their permitted successors and assigns.
14.8 Injunctive Relief. McAfee.com acknowledges that its failure to
perform any of the material terms or conditions of this Agreement shall result
in immediate and irreparable damage to NAI. McAfee.com also acknowledges that
there may be no adequate remedy at law for such failure and that, in the event
thereof, NAI shall be entitled to equitable relief in the nature of an
injunction and to all other available relief, at law or in equity.
14.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original and all of which taken
together shall constitute one and the same agreement.
14.10 Compliance with Laws. In exercising their rights under this
Agreement, the parties shall fully comply in all material respects with the
requirements of any and all applicable laws, regulations,
<PAGE> 21
rules and orders of any governmental body having jurisdiction over the exercise
of rights under this Agreement.
14.11 Construction. The headings in this Agreement are provided for
reference only and shall not be used as a guide to interpretation. When used in
this Agreement, the singular includes the plural and the plural includes the
singular, and gender related pronouns include the feminine, masculine and
neuter.
14.12 Export of Technical Data. Each Party agrees to comply with U.S.
export laws and regulations when exporting any materials or any items licensed
or developed under this Agreement or any portion thereof, or any system
containing such materials or items or portions thereof, or any technical data or
other Confidential Information, or any direct product of any of the foregoing
(collectively, "Program") from the U.S. or re-exporting (as defined in Section
734.2(b) of the Export Administration Regulations, as amended ("Regulations")) a
Program from one foreign country to another. It is the exporting party's
responsibility to comply with the U.S. Government requirements as they may be
amended from time to time. Without limiting the generality of the foregoing: (i)
regardless of any disclosure made by the exporting party to the other party of
an ultimate destination of a Program, the exporting party shall not export or
transfer, whether directly or indirectly, a Program, to anyone outside the U.S.
(including further export if the exporting party took delivery of the Program
outside the U.S.) without first complying strictly and fully with all export
controls that may be imposed on the Program by the U.S. Government or any
country or organization of nations within whose jurisdiction the exporting party
operates or does business; and (ii) absent any required prior authorization from
the Bureau of Export Administration, U.S. Department of Commerce, 14th and
Constitution Avenue, Washington, DC 20230, the exporting party will not export
or re-export the Program to any country in Country Groups D:1 or E:2 as defined
in the supplement No. 1 to Section 740 of the Regulations or such other
countries as come under restriction (including embargo) by action of the U.S.
Government, or to nationals from or residing in the foregoing countries, without
first obtaining permission from the appropriate U.S. Government authorities.
Each party will reasonably cooperate with the other party in obtaining export
licenses or approvals.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE DULY EXECUTED THIS AGREEMENT
AS OF THE EFFECTIVE DATE.
McAfee.com Corporation Networks Associates
Technology Corporation
By: /s/ SRIVATS SAMPATH By: /s/ PRABHAT GOYAL
--------------------------------- -------------------------------------
Name: SRIVATS SAMPATH Name: PRABHAT GOYAL
------------------------------- -----------------------------------
Title: Title:
------------------------------ ----------------------------------
Networks Associates, Inc. does hereby unconditionally and irrevocably agree to
guaranty the performance of, and all obligations, duties, and liabilities of
Network Associates Technology Corporation under this Agreement. Network
Associates, Inc. will perform all necessary acts to cause Network Associates
Technology Corporation to fully perform hereunder.
Networks Associates, Inc.
By: /s/ PRABHAT GOYAL
---------------------------------
Name: PRABHAT GOYAL
-------------------------------
Title:
------------------------------
<PAGE> 22
EXHIBIT A
ROYALTIES ON NAI LICENSED PRODUCTS
Percentage of Net Revenue
Q1 1999 20.00%
Q2 1999 18.375%
Q3 1999 16.75%
Q4 1999 15.125%
Q1 2000 13.50%
Q2 2000 11.875%
Q3 2000 10.25%
Q4 2000 8.625%
Q1 2001 Through the remaining Term of this Agreement = 7.00%
<PAGE> 23
EXHIBIT B
MCAFEE SOFTWARE END USER LICENSE AGREEMENT
NOTICE TO ALL USERS: CAREFULLY READ THE FOLLOWING LEGAL AGREEMENT ("AGREEMENT"),
FOR THE LICENSE OF SPECIFIED SOFTWARE ("SOFTWARE") BY NETWORK ASSOCIATES, INC.
("McAfee"). BY CLICKING THE ACCEPT BUTTON OR INSTALLING THE SOFTWARE, YOU
(EITHER AN INDIVIDUAL OR A SINGLE ENTITY) CONSENT TO BE BOUND BY AND BECOME A
PARTY TO THIS AGREEMENT. IF YOU DO NOT AGREE TO ALL OF THE TERMS OF THIS
AGREEMENT, CLICK THE BUTTON THAT INDICATES THAT YOU DO NOT ACCEPT THE TERMS OF
THIS AGREEMENT AND DO NOT INSTALL THE SOFTWARE. (IF APPLICABLE, YOU MAY RETURN
THE PRODUCT TO THE PLACE OF PURCHASE FOR A FULL REFUND.)
1. License Grant. Subject to the payment of the applicable license fees, and
subject to the terms and conditions of this Agreement, McAfee hereby grants to
you a non-exclusive, non-transferable right to use one copy of the specified
version of the Software and the accompanying documentation (the
"Documentation"). You may install one copy of the Software on one computer,
workstation, personal digital assistant, pager, "smart phone" or other
electronic device for which the Software was designed (each, a "Client Device").
If the Software is licensed as a suite or bundle with more than one specified
Software product, this license applies to all such specified Software products,
subject to any restrictions or usage terms specified on the applicable price
list or product packaging that apply to any of such Software products
individually.
a. Use. The Software is licensed as a single product; it may not be used
on more than one Client Device or by more than one user at a time, except as set
forth in this Section 1. The Software is "in use" on a Client Device when it is
loaded into the temporary memory (i.e., random-access memory or RAM) or
installed into the permanent memory (e.g., hard disk, CD-ROM, or other storage
device) of that Client Device. This license authorizes you to make one copy of
the Software solely for backup or archival purposes, provided that the copy you
make contains all of the Software's proprietary notices.
b. Server-Mode. You may use the Software on a Client Device as a server
("Server") within a multi-user or networked environment ("Server-Mode") only if
such use is permitted in the applicable price list or product packaging for the
Software. A separate license is required for each Client Device or "seat" that
may connect to the Server at any time, regardless of whether such licensed
Client Devices or seats are concurrently connected to, accessing or using the
Software. Use of software or hardware that reduces the number of Client Devices
or seats directly accessing or utilizing the Software (e.g., "multiplexing" or
"pooling" software or hardware) does not reduce the number of licenses required
(i.e., the required number of licenses would equal the number of distinct inputs
to the multiplexing or pooling software or hardware "front end"). If the number
of Client Devices or seats that can connect to the Software can exceed the
number of licenses you have obtained, then you must have a reasonable mechanism
in place to ensure that your use of the Software does not exceed the use limits
specified for the licenses you have obtained. This license authorizes you to
make or download one copy of the Documentation for each Client Device or seat
that is licensed, provided that each such copy contains all of the
Documentation's proprietary notices.
c. Volume Licenses. If the Software is licensed with volume license terms
specified in the applicable price list or product packaging for the Software,
you may make, use and install as many additional copies of the Software on the
number of Client Devices as the volume license authorizes. You must have a
reasonable mechanism in place to ensure that the number of Client Devices on
which the Software has been installed does not exceed the number of licenses you
have obtained. This license authorizes you to make or download one copy of the
Documentation for each additional copy authorized by the volume license,
provided that each such copy contains all of the Documentation's proprietary
notices.
2. Term. This Agreement is effective for an unlimited duration unless and
until earlier terminated as set forth herein. This Agreement will terminate
automatically if you fail to comply with any of the limitations or other
requirements described herein. Upon any termination or expiration of this
Agreement, you must destroy all copies of the Software and the Documentation.
3. Updates. For the time period specified in the applicable price list or
product packaging for the Software you are entitled to download revisions or
updates to the Software when and as McAfee publishes them via its electronic
bulletin board system, website or through other online services. For a period of
ninety (90) days from the date of the original purchase of the Software, you are
entitled to download one (1) revision or upgrade to the Software when and as
McAfee publishes it via its electronic bulletin board system, website or through
other online services. After the specified time period, you have no further
rights to receive any revisions or upgrades without purchase of a new license or
annual upgrade plan to the Software.
4. Ownership Rights. The Software is protected by United States copyright laws
and international treaty provisions. McAfee and its suppliers own and retain all
right, title and interest in and to the Software, including all copyrights,
patents, trade secret rights, trademarks and other intellectual property rights
therein. Your possession, installation, or use of the Software does not transfer
to you any title to the intellectual property in the Software, and you will not
acquire any rights to the Software except as expressly set forth in this
Agreement. All copies of the Software and Documentation made hereunder must
contain the same proprietary notices that appear on and in the Software and
Documentation.
5. Restrictions. You may not rent, lease, loan or resell the Software. You may
not permit third parties to benefit from the use or functionality of the
Software via a timesharing, service bureau or other arrangement, except to the
extent such use is specified in the applicable list price or product packaging
for the Software. You may not transfer any of the rights granted to you under
this Agreement. You may not reverse engineer, decompile, or disassemble the
Software, except to the extent the foregoing restriction is expressly prohibited
by applicable law. You may not modify, or create derivative works based upon,
the Software in whole or in part. You may not copy the Software or Documentation
except as expressly permitted in Section 1 above. You may not remove any
proprietary notices or labels on the Software. All rights not expressly set
forth hereunder are reserved by McAfee. McAfee reserves the right to
periodically conduct audits upon advance written notice to verify compliance
with the terms of this Agreement.
6. Warranty and Disclaimer.
a. Limited Warranty. McAfee warrants that for sixty (60) days from the
date of original purchase the media (e.g., diskettes) on which the Software is
contained will be free from defects in materials and workmanship.
b. Customer Remedies. McAfee's and its suppliers' entire liability and
your exclusive remedy for any breach of the foregoing warranty shall be, at
McAfee's option, either (i) return of the purchase price paid for the license,
if any, or (ii) replacement of the defective media in which the Software is
contained. You must return the defective media to McAfee at your expense with a
copy of your receipt. This limited warranty is void if the defect has resulted
from accident, abuse, or misapplication. Any replacement media will be warranted
for the remainder of the original warranty period. Outside the United States,
this remedy is not available to the extent McAfee is subject to restrictions
under United States export control laws and regulations.
c. Warranty Disclaimer. Except for the limited warranty set forth herein,
THE SOFTWARE IS PROVIDED "AS IS." TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
LAW, MCAFEE DISCLAIMS ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, AND NONINFRINGEMENT WITH RESPECT TO THE SOFTWARE AND THE ACCOMPANYING
DOCUMENTATION. YOU ASSUME RESPONSIBILITY FOR SELECTING THE SOFTWARE TO ACHIEVE
YOUR INTENDED RESULTS, AND FOR THE INSTALLATION OF, USE OF, AND RESULTS OBTAINED
FROM THE SOFTWARE. WITHOUT LIMITING THE FOREGOING PROVISIONS, MCAFEE MAKES NO
WARRANTY THAT THE SOFTWARE WILL BE ERROR-FREE OR FREE FROM INTERRUPTIONS OR
OTHER FAILURES OR THAT THE SOFTWARE WILL MEET YOUR REQUIREMENTS. SOME STATES AND
JURISDICTIONS DO NOT ALLOW LIMITATIONS ON IMPLIED WARRANTIES, SO THE ABOVE
LIMITATION MAY NOT APPLY TO YOU. The foregoing provisions shall be enforceable
to the maximum extent permitted by applicable law.
7. Limitation of Liability. UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY,
WHETHER IN TORT, CONTRACT, OR OTHERWISE, SHALL MCAFEE OR ITS SUPPLIERS BE LIABLE
TO YOU OR TO ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES OF ANY CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES
FOR LOSS OF GOODWILL, WORK STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, OR FOR ANY
AND ALL OTHER DAMAGES OR LOSSES. IN NO EVENT WILL MCAFEE BE LIABLE FOR ANY
DAMAGES IN EXCESS OF THE LIST PRICE MCAFEE CHARGES FOR A LICENSE TO THE
SOFTWARE, EVEN IF MCAFEE SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. THIS LIMITATION OF LIABILITY SHALL NOT APPLY TO LIABILITY FOR DEATH OR
PERSONAL INJURY TO THE EXTENT THAT APPLICABLE LAW PROHIBITS SUCH LIMITATION.
FURTHERMORE, SOME STATES AND JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR
LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THIS LIMITATION AND
EXCLUSION MAY NOT APPLY TO YOU. The foregoing provisions shall be enforceable to
the maximum extent permitted by applicable law.
8. United States Government. The Software and accompanying Documentation are
deemed to be "commercial computer software" and "commercial computer software
documentation," respectively, pursuant to DFAR Section 227.7202 and FAR Section
12.212, as applicable. Any use, modification, reproduction, release,
performance, display or disclosure of the Software and accompanying
Documentation by the United States Government shall be governed solely by the
terms of this Agreement and shall be prohibited except to the extent expressly
permitted by the terms of this Agreement.
9. Export Controls. Neither the Software nor the Documentation and underlying
information or technology may be downloaded or otherwise exported or re-exported
(i) into (or to a national or resident of ) Cuba, Iran, Iraq, Libya, North
Korea, Sudan, Syria or any other country to which the United States has
embargoed goods; or (ii) to anyone on the United States Treasury Department's
list of Specially Designated Nations or the United States Commerce Department's
Table of Denial Orders. By downloading or using the Software you are agreeing to
the foregoing and you are certifying that you are not located in, under the
control of, or a national or resident of any such country or on any such list.
IN ADDITION, YOU SHOULD BE AWARE OF THE FOLLOWING: EXPORT OF THE SOFTWARE MAY BE
SUBJECT TO COMPLIANCE WITH THE RULES AND REGULATIONS PROMULGATED FROM TIME TO
TIME BY THE BUREAU OF EXPORT ADMINISTRATION, UNITED STATES DEPARTMENT OF
COMMERCE, WHICH RESTRICT THE EXPORT AND RE-EXPORT OF CERTAIN PRODUCTS AND
TECHNICAL DATA. IF THE EXPORT OF THE SOFTWARE IS CONTROLLED UNDER SUCH RULES AND
REGULATIONS, THEN THE SOFTWARE SHALL NOT BE EXPORTED OR RE-EXPORTED, DIRECTLY OR
INDIRECTLY, (A) WITHOUT ALL EXPORT OR RE-EXPORT LICENSES AND UNITED STATES OR
OTHER GOVERNMENTAL APPROVALS REQUIRED BY ANY APPLICABLE LAWS, OR (B) IN
VIOLATION OF ANY APPLICABLE PROHIBITION AGAINST THE EXPORT OR RE-EXPORT OF ANY
PART OF THE SOFTWARE. SOME COUNTRIES HAVE RESTRICTIONS ON THE USE OF ENCRYPTION
WITHIN THEIR BORDERS, OR THE IMPORT OR EXPORT OF ENCRYPTION EVEN IF FOR ONLY
TEMPORARY PERSONAL OR BUSINESS USE. YOU ACKNOWLEDGE THAT THE IMPLEMENTATION AND
ENFORCEMENT OF THESE LAWS IS NOT ALWAYS CONSISTENT AS TO SPECIFIC COUNTRIES.
ALTHOUGH THE FOLLOWING COUNTRIES ARE NOT AN EXHAUSTIVE LIST THERE MAY EXIST
RESTRICTIONS ON THE EXPORTATION TO, OR IMPORTATION OF, ENCRYPTION BY: BELGIUM,
CHINA (INCLUDING HONG KONG), FRANCE, INDIA, INDONESIA, ISRAEL, RUSSIA, SAUDI
ARABIA, SINGAPORE, AND SOUTH KOREA. YOU ACKNOWLEDGE IT IS YOUR ULTIMATE
RESPONSIBILITY TO COMPLY WITH ANY AND ALL GOVERNMENT EXPORT AND OTHER APPLICABLE
LAWS AND THAT MCAFEE HAS NO FURTHER RESPONSIBILITY AFTER THE INITIAL SALE TO YOU
WITHIN THE ORIGINAL COUNTRY OF SALE.
10. High Risk Activities. The Software is not fault-tolerant and is not
designed or intended for use in hazardous environments requiring fail-safe
performance, including without limitation, in the operation of nuclear
facilities, aircraft navigation or communication systems, air traffic control,
weapons systems, direct life-support machines, or any other application in which
the failure of the Software could lead directly to death, personal injury, or
severe physical or property damage (collectively, "High Risk Activities").
McAfee expressly disclaims any express or implied warranty of fitness for High
Risk Activities.
11. Miscellaneous. This Agreement is governed by the laws of the United States
and the State of California, without reference to conflict of laws principles.
The application of the United Nations Convention of Contracts for the
International Sale of Goods is expressly excluded. This Agreement sets forth all
rights for the user of the Software and is the entire agreement between the
parties. This Agreement supersedes any other communications with respect to the
Software and Documentation. This Agreement may not be modified except by a
written addendum issued by a duly authorized representative of McAfee. No
provision hereof shall be deemed waived unless such waiver shall be in writing
and signed by McAfee or a duly authorized representative of McAfee. If any
provision of this Agreement is held invalid, the remainder of this Agreement
shall continue in full force and effect. The parties confirm that it is their
wish that this Agreement has been written in the English language only.
12. MCAFEE CUSTOMER CONTACT. If you have any questions concerning these terms
and conditions, or if you would like to contact McAfee for any other reason,
please call (408) 988-3832, fax (408) 970-9727, or write: McAfee Software, 3965
Freedom Circle, Santa Clara, California 95054. http://www.mcafee.com.
Statements made to you in the course of this sale are subject to the Year 2000
Information and Readiness Disclosure Act (Public Law 105-271). In the case of a
dispute, this Act may reduce your legal rights regarding the use of any
statements regarding Year 2000 readiness, unless otherwise specified in your
contract or tariff.
<PAGE> 24
EXHIBIT C
SUPPORT TERMS
<PAGE> 1
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made as of the
20th day of July, 1999, by and between McAfee.com Corporation, a Delaware
corporation (the "COMPANY"), and Networks Associates, Inc., a Delaware
corporation ("NAI").
RECITALS
WHEREAS, the Company is a wholly owned subsidiary of NAI and desires to
grant NAI registration rights.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as
follows:
1.1 Definitions. For purposes of this Agreement:
(a) The term "ACT" means the Securities Act of 1933,
as amended.
(b) The terms "CLASS A COMMON STOCK" and "CLASS B
COMMON STOCK" mean, respectively, the Company's Class A Common Stock, par value
$0.001 per share, and Class B Common Stock, par value $0.001 per share.
(c) The term "FORM S-3" means such form under the Act
as in effect on the date hereof or any registration form under the Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
(d) The term "CONTROL AFFILIATE" means any
combination, partnership, venture or the like with respect to which NAI directly
or indirectly owns a majority of the capital stock or equity interests or has
the right to elect a majority of the directors or individuals with comparable
responsibilities.
(e) The term "HOLDER" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.12 hereof.
(f) The term "1934 ACT" shall mean the Securities
Exchange Act of 1934, as amended.
(g) The terms "REGISTER", "REGISTERED" and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
<PAGE> 2
(h) The term "REGISTRABLE SECURITIES" means (i) the
shares of the Company's Class A Common Stock held by NAI or Class A Common Stock
issuable upon the conversion of the Company's Class B Common Stock held by NAI
and (ii) any Class A or Class B Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of the shares referenced in (i) above, excluding
in all cases, however, any Registrable Securities sold by a person in a
transaction in which his rights under this Section 1 are not assigned.
(i) The number of shares of "REGISTRABLE SECURITIES
THEN OUTSTANDING" shall be determined by (i) the number of shares of Class A
Common Stock outstanding which are Registrable Securities, and (ii) the number
of shares of Class A Common Stock issuable pursuant to then exercisable or
convertible securities (including shares of Class B Common Stock) which are
Registrable Securities.
(j) The term "SEC" shall mean the Securities and
Exchange Commission.
1.2 Demand Registration.
(a) If the Company shall receive at any time six (6)
months after the effective date of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction), a written request from either NAI or its control affiliates or
Holders of at least ten percent (10%) of the Registrable Securities then
outstanding ("INITIATING HOLDERS"), requesting that the Company file a
registration statement under the Act covering the registration of a portion of
the Registrable Securities then outstanding, then the Company shall:
(i) within ten (10) days of the receipt
thereof, give written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in
any event within sixty (60) days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered, subject to the limitations of subsection 1.2(b),
within fifteen (15) days of the mailing of such notice by the Company in
accordance with Section 2.5.
(b) If the Initiating Holders intend to distribute
the Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
subsection 1.2(a) and the Company shall include such information in the written
notice referred to in subsection 1.2(a). The underwriter will be selected by NAI
(if it or its control affiliate is the Initiating Holder) or otherwise the
Company. The underwriter shall be reasonably acceptable, as applicable, to
Company or a majority in interest of the Initiating Holders. In such event, the
right of any Holder or other holder of securities of the Company to include
securities in such registration shall be conditioned upon such Holder's or
holders' participation in such underwriting and the inclusion of such Holder's
or holders' securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder
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<PAGE> 3
or holder) to the extent provided herein. All Holders and other holders of
securities of the Company proposing to distribute their securities through such
underwriting shall (together with the Company as provided in subsection 1.5(e))
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any other provision
of this section 1.2, if the underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities and other holders of registration rights which would
otherwise be underwritten pursuant hereto, and the number of shares of
securities that may be included in the underwriting on behalf of each Holder or
other holder shall be allocated : (i) first, the Registrable Securities
requested to be included in such registration held by the Initiating Holders;
(ii) second, shares of Class A Common Stock held by other holders requested to
be included in such registration, provided that such amount shall be allocated
among such other holders on a pro rata basis based upon their respective
percentage of ownership of the total number of shares of Common Stock then
outstanding and (iii) third, shares of Class A Common Stock to be offered by the
Company in such registration. For purposes of allocation securities to be
included in any offering, for any selling stockholder which is a partnership or
corporation, the partners, retired partners and stockholders of such holder (and
in the case of a partnership, any affiliated partnerships), or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
(c) Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer taking action with respect to such filing for a period of not
more than ninety (90) days after receipt of the request of the Initiating
Holders; provided, however, that the Company may not utilize this right more
than once in any twelve-month period. In addition, the Company shall not be
obligated to effect, or to take any action to effect, any registration pursuant
to this Section 1.2 if (i) the Initiating Holders propose to dispose of shares
of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.4 below or (ii) the gross
proceeds of securities being registered pursuant to Section 1.2 shall not
reasonably be expected to exceed $2 million.
(d) Company Registration. If (but, without any
obligation to do so), the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders other than the
Holders) any of its stock or other securities under the Act in connection with
the public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan, a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities or a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also
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<PAGE> 4
being registered), the Company shall, at such time, promptly give each Holder
written notice of such registration. Upon the written request of each Holder
given within fifteen (15) days after mailing of such notice by the Company in
accordance with Section 2.5, the Company shall, subject to the provisions of
paragraph (b) below, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
(e) Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under this Section 1.3 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters). If the total
amount of securities, including Registrable Securities requested by stockholders
to be included in such offering, exceeds the amount of securities that the
underwriters determine in their sole discretion is compatible with the success
of the offering in view of market conditions, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering, but in no event
shall the amount of securities of the selling Holders included in the offering
be reduced below twenty-five percent (25%) of the total amount of securities
included in such offering. Allocation of securities to be sold in any such
offering shall be made pro-rata amongst the selling stockholders according to
the total number of securities held by each such selling stockholder and
entitled to inclusion therein on the basis of a registration rights agreement
with the Company. For purposes of allocation securities to be included in any
offering, for any selling stockholders which is a partnership or corporation,
the partners, retired partners and stockholders of such holder (and in the case
of a partnership, any affiliated partnerships), or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
1.4 Form S-3 Registration. In case the Company shall receive from
one or more of the Holders a written request or requests that the Company effect
a registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this Section
1.4: (1) if Form S-3 is not available for such offering by the Holders; (2) if
the Holders,
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<PAGE> 5
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than one million dollars
($1,000,000); (3) if the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than
ninety (90) days after receipt of the request of the Holder or Holders under
this Section 1.4; provided, however, that the Company shall not utilize this
right more than once in any twelve month period; (4) if the Company has, within
the twelve (12) month period preceding the date of such request, already
effected four (4) registrations on Form S-3 for the Holders pursuant to this
Section 1.4; or (5) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file
a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 1.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 1.2 or 1.3, respectively.
1.5 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for a period of up to one
hundred eighty (180) days or until the distribution contemplated in the
Registration Statement has been completed, whichever period is longer; provided,
however, that such 180-day period shall be extended for a period of time equal
to the period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall
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<PAGE> 6
be reasonably requested by the Holders; provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) Use its best efforts to furnish, at the request
of any Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this Section
1, if such securities are being sold through underwriters, (i) an opinion, dated
such date, of the counsel representing the Company for the purposes of such
registration, in substantially the form as may be given to the underwriters in
such public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a letter dated such
date, from the independent certified public accountants of the Company, in
substantially the form as may be given by independent certified public
accountants to underwriters in such public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities; provided in any such case, the Company is required to provide such
opinion or letter, as the case may be, to the underwriters in such offering.
1.6 Furnish Information.
(a) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
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<PAGE> 7
(b) The Company shall have no obligation with respect
to any registration requested pursuant to Section 1.2 or Section 1.4 if, due to
the operation of subsection 1.6(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.4(b)(2), whichever is applicable.
1.7 Expenses of Demand or S-3 Registration. All expenses, other
than underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2 or 1.4,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the Company
and the reasonable fees and disbursements of one counsel for the selling Holders
shall be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 or 1.4 if the registration request is subsequently withdrawn at
the request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless (i) the registration is withdrawn following any deferral of the
registration by the Company pursuant to Section 1.2(c) or 1.4(b)(3); or (ii) the
registration is withdrawn due to a material adverse change in the Company's
business or financial condition.
1.8 Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.12), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of counsel for the Company and one
counsel for the selling Holders selected by them, but excluding underwriting
discounts and commissions relating to Registrable Securities.
1.9 No Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers, directors and constituent
general partners of such Holder, any underwriter (as defined in the Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "VIOLATION"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the
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<PAGE> 8
statements therein not misleading, or (iii) any violation or alleged violation
by the Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, the 1934 Act or any state securities law;
and the Company will pay, as incurred, to each such Holder, the officers,
directors and constituent general partners of such Holder, each such underwriter
or controlling person any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action, as such expenses are incurred; provided, however, that the
indemnity agreement contained in this Section 1.10(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and the officers,
directors and constituent general partners of such Holder and any controlling
person of any such underwriter or other Holder, severally but not jointly,
against any losses, claims, damages, or liabilities (joint or several) to which
any of the foregoing persons may become subject, under the Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 1.10(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 1.10(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, further, that in no event shall any
Holder's cumulative, aggregate liability under this Section 1.10(b), under
Section 1.10(d), or under such sections together, exceed the gross proceeds from
the offering received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 1.10 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.10,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with one counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such
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<PAGE> 9
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10 unless the failure to deliver notice is materially prejudicial
to its ability to defend such action. Any omission to so deliver written notice
to the indemnifying party will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this
Section 1.10 is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations; provided, however, that (A) in no event shall any
Holder's cumulative, aggregate liability under this Section 1.10(d), or under
Section 1.10(b), or under such sections together, exceed the net proceeds from
the offering received by such Holder. Notwithstanding anything to the contrary
herein, no party shall be liable for contribution under this Section 1.10(d),
except to the extent and under the circumstances as such party would have been
liable to indemnity under Section 1.10(a) or Section 1.10(b), as the case may
be, if such indemnification were enforceable under applicable law. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control with respect to the parties to such agreement.
(f) The obligations of the Company and Holders under
this Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company and NAI (for
so long as the Company's eligibility to use Form S-3 is partially dependent upon
NAI's eligibility to use Form S-3) each agree to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of
-9-
<PAGE> 10
the first registration statement filed by the Company for the offering of its
securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;
(c) file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities pursuant to this Section 1
may be assigned (but only with all related obligations) by NAI (or its control
affiliate) to any control affiliate of NAI. In addition, the rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least Two Hundred Thousand (200,000) shares of Registrable Securities (subject
to appropriate adjustment for stock splits, stock dividends, combinations and
other recapitalizations), provided: (a) the Company is, within a reasonable time
after such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.14 below;
and (c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee of a holder
of Registrable Securities, (i) the holdings of affiliated partnerships, limited
liability companies and other entities, and their constituent or retired
partners or members (collectively, "AFFILIATED PERSONS"), and (ii) the holdings
of spouses, ancestors, lineal descendants and siblings who acquire Registrable
Securities by gift, will or intestate succession (collectively, "FAMILY
MEMBERS"), shall in each case be aggregated together, provided that all
assignees and transferees who would not qualify individually for assignment of
registration rights shall designate in writing to the Company from time to time
a single attorney-in-fact on behalf of the entire group of Affiliated Persons or
Family Members, as the case may be, for the purpose of exercising any rights,
receiving notices or taking any action under this Section 1.
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<PAGE> 11
1.13 Limitations on Subsequent Registration Rights. From
and after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company that would allow such holder or prospective holder
to include such securities in any registration filed under Sections 1.2, 1.3 or
1.4 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any registration pursuant to Section 1.2
or only to the extent that the inclusion of his securities will not reduce the
amount of the Registrable Securities of the Holders that is included or pursuant
to Section 1.3 subject to the allocation provisions set forth in Section 1.3.
1.14 Termination of Registration Rights. The right of any
Holder to request registration or inclusion in any registration pursuant to
Section 1.3 shall terminate three (3) years after the Company's initial firmly
underwritten public offering, if all shares of Registrable Securities
beneficially owned or subject to Rule 144 aggregation by such Holder may
immediately be sold under Rule 144 (without regard to Rule 144(k)) during any
90-day period.
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by
and construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
2.3 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. All notices and other communications
required or permitted hereunder shall be in writing, shall be effective when
given, and shall in any event be deemed to be given upon receipt or, if earlier,
(a) five (5) days after deposit with the U.S. Postal Service or other applicable
postal service, if delivered by first Class mail, postage prepaid, (b) upon
delivery, if delivered by hand, (c) one (1) business day after the business day
of deposit with Federal Express or similar overnight courier, freight prepaid or
(d) one (1) business day after the business day of facsimile transmission, if
delivered by facsimile transmission with copy by first Class mail, postage
prepaid, and shall be addressed (i) if to NAI, at the address of its principal
corporate offices (attention: Secretary), or at such other address as a party
may designate by ten (10) days' advance written notice to the other party
pursuant to the provisions above, (ii) if to a Holder (other than NAI
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<PAGE> 12
or a control affiliate thereof), at the address of its principal corporate
offices (attention: Secretary), or at such other address as a party may
designate by ten (10) days' advance written notice to the other party pursuant
to the provisions above; and (iii) if to the Company, at the address of its
principal corporate offices (attention: Secretary), or at such other address as
a party may designate by ten (10) days' advance written notice to the other
party pursuant to the provisions above.
2.6 Expenses. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
2.7 Amendments and Waivers. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and holders of
Registrable Securities holding at least a majority of the Registrable Securities
then outstanding (or the sale holder of Registrable Securities). Any amendment
or waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
2.8 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
2.9 Entire Agreement. This Agreement (including the
Exhibits hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and supersedes all prior agreements and understandings with respect to the
subject matter hereof.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
COMPANY: McAFEE.COM CORPORATION
By: /s/ SRIVATS SAMPATH
----------------------------------
Srivats Sampath, President
Address: 2805 Bowers Avenue
Santa Clara, California 95051
NAI: NETWORKS ASSOCIATES, INC.
By: /s/ PRABHAT GOYAL
----------------------------------
Address: 3965 Freedom Circle
Santa Clara, California 95054
<PAGE> 1
EXHIBIT 10.8
ASSET CONTRIBUTION AND RECEIVABLES SETTLEMENT AGREEMENT
THIS ASSET CONTRIBUTION AND RECEIVABLES SETTLEMENT AGREEMENT is entered
into as of January 1, 1999 (the "EFFECTIVE DATE"), by and between NETWORKS
ASSOCIATES, INC., a Delaware corporation ("NAI"), and McAFEE.COM CORPORATION., a
Delaware corporation and a wholly owned subsidiary of NAI ("MCAFEE.COM").
RECITALS
WHEREAS, McAfee.com is a wholly-owned subsidiary of NAI; and
WHEREAS, McAfee.com is engaged in the field of internet-based software
sales and services, and the conduct of such other activities as may be
incidental or related thereto; and
WHEREAS, consistent with the resolutions of the NAI board of directors,
NAI is to transfer to McAfee.com certain intellectual property and related
research and development assets, including assets previously owned by the direct
and indirect wholly owned subsidiaries of NAI, as well as certain rights to
future revenues and tangible assets including cash; and
WHEREAS, NAI and McAfee.com desire such transfer of assets to qualify
as a tax free contribution of capital under Section 351 of the Internal Revenue
Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, provisions and covenants contained herein, and for other good and
valuable consideration, the receipt and legal sufficiency whereof are hereby
acknowledged, the parties hereto further agree as follows:
ARTICLE I
TRANSFER OF ASSETS
SECTION 1.1 AGREEMENT TO TRANSFER AND TRANSFER OF INCLUDED ASSETS. Upon
and subject to the terms and conditions of this Agreement, as of January 1,
1999, NAI hereby assigns, agrees to assign, transfers, conveys and delivers to
McAfee.com all of its right, title, and interest in the following assets (the
"INCLUDED ASSETS"): all tangible personal property, intangible property, rights
and other assets owned by NAI and listed in Exhibit A attached hereto, as of the
Closing Date.
SECTION 1.2 FURTHER AGREEMENTS TO TRANSFER ASSETS. Following the Effective
Date of this Agreement, if the NAI board of directors approves a subsequent
assignment or transfer to McAfee.com of assets not included among the Included
Assets, and the McAfee.com board of directors approves the acceptance of such
subsequent assignment or transfer of assets (an "ADDITIONAL TRANSFER"), then
such Additional Transfer may be effected subject to the terms and conditions of
this Agreement. Such Additional Transfer may be effected by adding a list of the
assets to be included in the Additional Transfer in an addendum to Exhibit A,
and by the execution of an additional Bill of Sale substantially in the form
attached hereto as Exhibit B.
SECTION 1.3 LIABILITIES. NAI shall not transfer, and McAfee.com shall not
assume, any liabilities whatsoever as part of this Agreement, except for those
liabilities that may result directly from any of the Included Assets on Exhibit
A. Such liabilities resulting directly from any of the Included Assets on
Exhibit A shall be referred herein to as the "ASSUMED LIABILITIES".
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<PAGE> 2
SECTION 1.4 CONSIDERATION FOR THE TRANSFER. As consideration for the
transfer described in Section 1.1 above, McAfee.com agrees to record such
transfer as a contribution of capital on behalf of NAI. NAI shall not receive
and McAfee.com shall not give any additional stock or other consideration in
consideration of this transfer.
SECTION 1.5 COOPERATION. NAI shall take all actions necessary to execute
any and all documents as may be reasonably requested by McAfee.com from time to
time to transfer the assets listed in Section 1.1 hereof and Exhibit A hereto
and otherwise fully vest or perfect in McAfee.com all right, title and interest
in and to such assets assigned pursuant to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF NAI
NAI hereby represents and warrants to McAfee.com as follows:
SECTION 2.1 INCORPORATION; AUTHORIZATION; ETC.
(a) Organization and Good Standing. NAI is a corporation duly
organized, validly existing and in good standing under the
laws of the jurisdiction of the State of Delaware. NAI has
full corporate power and authority to execute, deliver and
perform this Agreement. The execution, delivery and
performance of this Agreement by NAI has been duly authorized
by all necessary corporate and stockholder actions.
(b) Binding Effect. This Agreement has been duly executed and
delivered by NAI and, assuming the due execution and delivery
hereof by McAfee.com, constitutes the legal, valid and binding
obligation of NAI, enforceable against NAI in accordance with
its terms.
(a) Ownership of Assets. NAI has good, valid and marketable title
to all the Included Assets free and clear of all claims,
charges, liens, mortgages, security interests, pledges,
restrictions or encumbrances. NAI owns or possesses licenses
or other legally enforceable rights to use all intellectual
property related and other intangible assets which are
Included Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MCAFEE.COM
McAfee.com hereby represents and warrants to NAI as follows:
SECTION 3.1 INCORPORATION; AUTHORIZATION; ETC.
(a) Organization. McAfee.com is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware. McAfee.com has full corporate power and
authority to execute, deliver and perform this Agreement. The
execution, delivery and performance of this Agreement by
McAfee.com has been duly authorized by all necessary corporate
actions on the part of McAfee.com.
-2-
<PAGE> 3
(b) Binding Effects. This Agreement has been duly executed and
delivered by McAfee.com, and, assuming the due execution and
delivery hereof by NAI, this Agreement constitutes the legal,
valid and binding obligation of McAfee.com, enforceable
against McAfee.com in accordance with its terms.
ARTICLE IV
ADDITIONAL COVENANTS AND MISCELLANEOUS PROVISIONS
SECTION 4.1 INDEMNIFICATION. In the event that the transfer of assets
effected by this Agreement fails to qualify as a tax free contribution of
capital under Section 351 of the Internal Revenue Code of 1986, as amended,
McAfee.com agrees to indemnify NAI against any tax liabilities, losses, claims,
or other damages that result from such failure.
SECTION 4.2 ACCOUNT RECONCILIATION. In connection with the assets being
contributed to McAfee.com pursuant to this Agreement, including but not limited
to those assets specified in Exhibit A hereto, and any other assets attributable
to the McAfee.com business as operated since January 1, 1996, NAI will make a
single, lump-sum, no interest payment net of all taxes to McAfee.com for
purposes of reconciling the accounts of each company. To the extent any revenues
are received by NAI after September 30, 1999 which are attributable to
McAfee.com assets or the McAfee.com business, NAI shall make a lump-sum payment
without interest to McAfee.com on a quarterly basis thereafter.
SECTION 4.3 COMPLIANCE WITH BULK SALES LAWS. The parties hereby waive
compliance with the bulk sales law and any other similar laws in any applicable
jurisdiction in respect of the transactions contemplated by this Agreement,
including, without limitation, any applicable state tax law that may require
notification of state taxing authorities and related actions in respect of bulk
sales of assets outside of the ordinary course of business.
SECTION 4.4 NOTIFICATION OF CERTAIN MATTERS. NAI shall promptly notify
McAfee.com, or McAfee.com shall promptly notify NAI:
(a) if, subsequent to the date of this Agreement and prior to the
Closing Date, it becomes aware of the occurrence of any event
or the existence of any fact that renders any of the
representations and warranties made in Article II and III,
respectively, inaccurate or untrue in any material respect;
(b) of any notice or other communication from any third party
alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by
this Agreement; or
(c) of any notice or other communication from any governmental
authority in connection with the transactions contemplated
hereby.
SECTION 4.5 FURTHER ASSURANCES. Each party hereto shall execute, deliver,
file and record, or cause to be executed, delivered, filed and recorded, such
further agreements, instruments and other documents, and take, or cause to be
taken, such further actions, as the other party hereto may reasonably request as
being necessary or advisable to effect or evidence the transactions contemplated
by this Agreement.
-3-
<PAGE> 4
SECTION 4.6 ACCESS. The parties hereto will allow each other reasonable
access to the books and records of one another relating to the Included Assets
and the Assumed Liabilities, and to personnel having knowledge of the
whereabouts and/or contents thereof, for legitimate business reasons, such as
the preparation of tax returns or the defense of litigation. The requesting
party will hold in confidence all confidential information identified as such
by, and obtained from, the disclosing party or any of its officers, agents,
representatives or employees.
SECTION 4.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with federal law as it applied to patents, copyrights
and trademarks and in accordance with the laws of the State of California as
applied to contracts entered into and to be performed entirely within the State
of California.
SECTION 4.8 THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended, nor shall it be constructed, to confer any rights or benefits upon any
person (including, but not limited to, any employee or former employee of NAI)
other than the parties hereto.
SECTION 4.9 ENTIRE AGREEMENT. This Agreement and the schedules and
Exhibits hereto contain the entire agreement between the parties with respect to
the transfer of NAI assets to McAfee.com, and constitutes the complete, final
and exclusive embodiment of the parties agreement with respect to that subject
matter and supersedes all prior agreements whether written or oral which may
have been entered into by the parties on the subject matter.
SECTION 4.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the parties hereto and their respective successors and assigns,
provided, however, that no party hereto will assign its rights or delegate its
obligations under this Agreement without the express written consent of the
other parties hereto except that McAfee.com may, upon notice to the other
parties hereto, assign its rights under this Agreement to any one or more of its
affiliates so long as such assignee or assignees assumes all of McAfee.com's
liabilities and obligations hereunder.
SECTION 4.11 AMENDMENT. No change, modification or amendment of this
Agreement shall be valid or binding on the parties unless such change or
modification shall be in writing signed by the party or parties against whom the
same is sought to be enforced.
Executed as of January 1, 1999
BY:
NETWORKS ASSOCIATES, INC. McAFEE.COM CORPORATION
3965 Freedom Circle 2810 Bowers Avenue
Santa Clara, California 95054 Santa Clara, California 95054
By: /S/ PRABHAT GOYAL By: /S/ SRIVATS SAMPATH
---------------------------------- --------------------------------
Name: Prabhat Goyal Name: Srivats Sampath
-------------------------------- ------------------------------
Title: Chief Financial Officer Title: Chief Executive Officer
------------------------------- -----------------------------
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<PAGE> 5
EXHIBIT A
TO THE ASSET CONTRIBUTION AGREEMENT
ASSETS TO BE TRANSFERRED
Networks Associates, Inc. ("NAI") hereby transfers to McAfee.com
Corporation all tangible personal property, intangible property, rights and
other assets listed on this Exhibit A which prior to the Closing Date were owned
by NAI:
o The co-host agreements and other agreements to which NAI is party which
relate specifically to the consumer e-commerce business [including
those agreements with Tesserae, Computer Literacy, Visto, and
Beyond.com (formerly Software.net)].
o McAfee.com customer database and subscriptions (defined as customers
who have registered for evaluation versions of retail products such as
Clinic, Oil Change, or retail SecureCast).
o Revenue attributable to McAfee.com advertising and sponsorship
agreements
o Revenue attributable to co-host agreements without a retail product
distribution arrangement (co-hosts with a retail product distribution
component shall have a royalty to be decided).
o NAI hereby assigns, transfers and sets over, unto McAfee.com, its
successors, legal representatives and assigns, its entire right, title
and interest in, to and under the said inventions listed below, and the
said United States application and all divisions, renewals and
continuations thereof, and all Patents of the United States which may
be granted thereon and all reissues and extensions thereof; and all
applications for industrial property protection, including, without
limitation, all applications for patents, utility models, and designs
which may hereafter be filed for said invention in any country or
countries foreign to the United States, together with the right to file
such applications and the right to claim for the same the priority
rights derived from said United States application under the Patent
Laws of the United States, the International Convention for the
Protection of Industrial Property, or any other international agreement
or the domestic laws of the country in which any such application is
filed, as may be applicable; and all forms of industrial property
protection, including, without limitation, patents, utility models,
inventors' certificates and designs which may be granted for said
inventions in any country or countries foreign to the United States and
all extensions, renewals and reissues thereof.
<TABLE>
<CAPTION>
NAI MATTER SERIAL NO. PAT. NO. TITLE STATUS FILING ISSUE INVENTOR(S) TYPE
---------- ---------- -------- ----- ------ ------- ------ ----------- ----
DATE DATE
---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US
98.017.01 09/208,735 Method and System for Pending 12/8/98 Sampath, Basic
Maintaining and Balasubramanian,
Configuring a Personal Lingarkar,
Computer Katchapalayam,
US Kannan
98.019.01 09/248,115 Method and Apparatus for Pending 2/11/99 Sampath, CIP of
Securing Software Balasubramanian, 09/208,735
Distributed Over a Network Kannan,
Revashetti,
Katchapalayam
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
98.020.01 US Method and System for Pending 3/16/99 Balasubramanian, CIP of
09/270,107 Processing Events Related to Kannan, 09/248,115
a First Type of Browser from Sampath,
a Second Type of Browser Katchapalayam
</TABLE>
6
<PAGE> 7
EXHIBIT B
BILL OF SALE
Pursuant to that certain Asset Contribution and Receivables Settlement
Agreement dated as of January 1, 1999 (the "Asset Contribution Agreement"), by
and among Networks Associates, Inc., a Delaware corporation, and McAfee.com
Corporation, a Delaware corporation, for good and valuable consideration,
receipt of which is hereby acknowledged, Networks Associates Inc. does hereby
convey, assign, transfer and deliver to McAfee.com Corporation good, valid and
marketable title to the Included Assets free and clear of any and all mortgages,
pledges, leases, licenses, charges, liens, encumbrances and defects, other than
the Assumed Liabilities, which McAfee.com Corporation hereby assumes.
Capitalized terms used, but not defined herein, shall have the meanings
described thereto in the Asset Contribution Agreement.
IN WITNESS WHEREOF, the parties have caused this Bill of Sale to be
duly executed effective as of January 1, 1999.
NETWORKS ASSOCIATES INC.
/s/ PRABHAT GOYAL
--------------------------------
By: Prabhat Goyal
Title: Vice President and Chief
Financial Officer
McAFEE.COM CORPORATION
/s/ SRIVATS SAMPATH
--------------------------------
By: Srivats Sampath
--------------------------------
Title: Chief Executive Officer
-----------------------------
8
<PAGE> 1
EXHIBIT 10.9
INTERCOMPANY
REVOLVING LOAN AGREEMENT
This INTERCOMPANY REVOLVING LOAN AGREEMENT ("Loan Agreement"), dated as
of January 1, 1999, is entered into by and between:
(1) Networks Associates, Inc. ("Lender"); and
(2) McAfee.com Corporation ("Borrower").
In consideration of the covenants, conditions and agreements set forth herein,
the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "Advance" shall have the meaning given in Section 2.1 of the
Loan Agreement.
1.2 "Business Day" shall mean any day on which commercial banks
are not authorized or required to close in the United States.
1.3 "Commitment" shall mean an amount equal to Thirty Million
Dollars ($30,000,000.00).
1.4 "Default" shall mean any event or circumstance not yet
constituting an Event of Default but which, with the giving of any notice or the
lapse of any period of time or both, would become an Event of Default.
1.5 "Event of Default" shall have the meaning given to that term
in Section 5.01.
1.6 "GAAP" shall mean generally accepted accounting principles and
practices as promulgated by the Financial Accounting Standards Board and as in
effect in the United States from time to time, consistently applied. Unless
otherwise indicated in this Loan Agreement, all accounting terms used in this
Loan Agreement shall be construed, and all accounting and financial computations
hereunder or thereunder shall be computed, in accordance with GAAP.
1.7 "Governmental Authority" shall mean any domestic or foreign
national, state or local government, any political subdivision thereof, any
department, agency, authority or bureau of any of the foregoing, or any other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
1.8 "Indebtedness" of any Person shall mean and include the
aggregate amount of, without duplication (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person to pay the deferred purchase price of property or services (other than
accounts payable incurred in the ordinary course of business determined in
accordance with generally accepted accounting principles), (d) all obligations
under capital leases of such Person, (e) all obligations or liabilities of
others secured by a lien on any asset of such Person, whether or not such
obligation or liability is assumed, (f) all guaranties of such Person of the
obligations of another Person; (g) all
9
<PAGE> 2
obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement upon an
event of default are limited to repossession or sale of such property), (h) net
exposure under any interest rate swap, currency swap, forward, cap, floor or
other similar contract that is not entered to in connection with a bona fide
hedging operation that provides offsetting benefits to such Person, which
agreements shall be marked to market on a current basis, (i) all reimbursement
and other payment obligations, contingent or otherwise, in respect of letters of
credit.
1.9 "LIBOR Rate" shall mean the rate per annum, calculated to the
nearest .01%, at which U.S. dollar deposits are offered in the London interbank
market for one month periods as quoted in the "Money Rates" column of The Wall
Street Journal on the first Business Day of each calendar month. All
computations of such interest shall be based on a year of 360 days and actual
days elapsed. Such LIBOR Rate shall remain in effect until it is adjusted on the
first Business Day of the following calendar month.
1.10 "Loan Agreement" shall have the meaning set forth in the
opening paragraph of this document.
1.11 "Loan Documents" shall mean and include this Loan Agreement
and any other documents, instruments and agreements delivered to Lender in
connection with this Loan Agreement.
1.12 "Obligations" shall mean and include all Advances, debts,
liabilities, and financial obligations, howsoever arising, owed by Borrower to
Lender of every kind and description (whether or not evidenced by any note or
instrument), direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising pursuant to the terms of any of the Loan
Documents, including, without limitation, all interest, fees, charges, expenses,
reasonable attorneys' fees (and expenses) and accountants' fees (and expenses)
chargeable to Borrower or payable by Borrower hereunder or thereunder.
1.13 "Person" shall mean and include an individual, a partnership,
a corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a Governmental Authority.
1.14 "Termination Date" shall mean the second anniversary of the
date of this Loan Agreement.
ARTICLE 2
ADVANCES
2.1 Terms. Subject to the terms and conditions of this Loan
Agreement, Lender agrees to advance to Borrower from time to time and until the
Termination Date, such sums as Borrower may request (the "Advances") but which
shall not exceed, in the aggregate principal amount at any one time outstanding,
the Commitment. Advances shall be made in lawful currency of the United States
of America and shall be made in same day or immediately available funds. Each
Advance shall be in an amount equal to at least $10,000 or any integral multiple
of $5,000 in excess thereof and shall be made three Business Days after written
request (or telephonic request confirmed in writing). Subject to the terms and
conditions hereof, Borrower may borrow pursuant to this Section 2.1, prepay the
Advances and reborrow pursuant to this Section 2.1.
2.2 Payment of Outstanding Amounts.
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(a) If not paid earlier, the outstanding principal and
interest balance of all Advances shall be due and payable to the Lender on the
Termination Date.
(b) At the Lender's sole option, the Lender may require
the Borrower to pay the principal and interest balance of all Advances then
outstanding at any time on or after the date that is thirty (30) calendar days
following the closing of an initial public offering of the capital stock of the
Borrower pursuant to the Securities Act of 1933, as amended.
2.3 Interest Payments. Interest on the outstanding principal
balance under the Advances shall accrue at the LIBOR Rate in effect. All
computations of such interest shall be based on a year of 360 days and actual
days elapsed for each day on which any principal balance is outstanding under
the terms of the Loan Agreement.
2.4 Interest Payments. All accrued and unpaid interest shall be
due on the first Business Day of each month. If not paid earlier, all
outstanding accrued interest hereunder shall be due and payable to the Lender on
the Termination Date.
2.5 Other Payment Terms.
(a) Manner. Borrower shall make all payments due to
Lender hereunder in lawful money of the United States and in same day or
immediately available funds.
(b) Date. Whenever any payment due hereunder shall fall
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest or fees, as the case may be.
(c) Default Rate. From and after the occurrence of an
Event of Default and during the continuance thereof, Borrower shall pay interest
on all Obligations not paid when due, from the date due thereof until such
amounts are paid in full at a per annum rate equal to the three (3) percentage
points in excess of the rate otherwise applicable to Advances. All computations
of such interest shall be based on a year of 360 days and actual days elapsed.
2.6 Loan Account. The Obligations of Borrower to Lender
hereunder shall be evidenced by one or more accounts or records maintained by
Lender in the ordinary course of business. The accounts or records maintained by
Lender shall be presumptive evidence of the amount of such Obligations, and the
interest and principal payments thereon. Any failure so to record or any error
in so doing shall not, however, limit, increase or otherwise affect the
obligation of Borrower hereunder to pay any amount owning hereunder. Upon
Lender's request, Borrower shall execute a promissory note in favor of Lender.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BORROWER
To induce Lender to enter into this Loan Agreement and to make Advances
hereunder, Borrower represents and warrants to Lender as follows:
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3.1 Due Incorporation, etc. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation.
3.2 Authority. The execution, delivery and performance by Borrower
of each Loan Document to be executed by Borrower and the consummation of the
transactions contemplated thereby (i) are within the power of Borrower and (ii)
have been duly authorized by all necessary actions on the part of Borrower.
3.3 Enforceability. Each Loan Document executed, or to be
executed, by Borrower has been, or will be, duly executed and delivered by
Borrower and constitutes, or will constitute, a legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and general principles of equity.
ARTICLE 4
CONDITIONS TO MAKING ADVANCES
Lender's obligation to make the initial Advance and each subsequent
Advance is subject to the prior satisfaction or waiver of all the conditions set
forth in this Article 4.
4.1 Principal Loan Documents. Borrower shall have duly executed
and delivered to Lender: (a) the Loan Agreement; and (b) such other documents,
instruments and agreements as Lender may reasonably request.
4.2 Representations and Warranties Correct. The representations
and warranties made by Borrower in Article 3 hereof shall be true and correct as
of the date on which each Advance is made and after giving effect to the making
of the Advance. The submission by Borrower to Lender of a request for an Advance
shall be deemed to be a certification by the Borrower that as of the date of
borrowing, the representations and warranties made by Borrower in Article 3
hereof are true and correct.
4.3 No Event of Default or Default. No Event of Default or Default
has occurred or is continuing.
4.4 Total Outstanding Advances. The total aggregate principal
amount of outstanding Advances does not exceed the Commitment.
ARTICLE 5
EVENTS OF DEFAULT
5.1 Events of Default. The occurrence of any of the following
shall constitute an "Event of Default" under this Loan Agreement and the Note:
(a) Failure to Pay. Borrower shall fail to pay (i) the
principal amount of all outstanding Advances on the Termination Date hereunder;
(ii) any interest, Obligation or other payment required under the terms of this
Loan Agreement or any other Loan Document on the date due and such failure shall
continue for five (5) Business Days after Borrower's receipt of Lender's written
notice thereof to Borrower; or (iii) any
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Indebtedness (excluding Obligations) owed by Borrower to Lender on the date due
and such failure shall continue for five (5) Business Days after Borrower's
receipt of Lender's written notice thereof to Borrower.
(b) Breaches of Covenants. Borrower shall fail to observe
or perform any other covenant, obligation, condition or agreement contained in
this Loan Agreement or any other Loan Document and (i) such failure shall
continue for ten (10) Business Days, or (ii) if such failure is not curable
within such ten (10) Business Day period, but is reasonably capable of cure
within thirty (30) Business Days, either (A) such failure shall continue for
thirty (30) Business Days or (B) Borrower shall not have commenced a cure in a
manner reasonably satisfactory to Lender within the initial ten (10) Business
Day period; or
(c) Representations and Warranties. Any representation,
warranty, certificate, or other statement (financial or otherwise) made or
furnished by or on behalf of Borrower to Lender in writing in connection with
any of the Loan Documents, or as an inducement to Lender to enter into this Loan
Agreement, shall be false, incorrect, incomplete or misleading in any material
respect when made or furnished; or
(d) Voluntary Bankruptcy or Insolvency Proceedings.
Borrower shall (i) apply for or consent to the appointment of a receiver,
trustee, liquidation or custodian of itself or of all or a substantial part of
its property, (ii) be unable, or admit in writing its inability, to pay its
debts generally as they mature, (iii) make a general assignment for the benefit
of its or any of its creditors, (iv) be dissolved or liquidated in full or in
part, (v) become insolvent (as such term is defined in 11 U.S.C. '101 (32), as
amended from time to time), (vi) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or other
proceeding commenced against it, or (vii) take any action for the purpose of
effecting any of the foregoing; or
(e) Involuntary Bankruptcy or Insolvency Proceedings.
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Borrower or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to Borrower or the debts thereof under any bankruptcy,
insolvency or other similar law now or hereafter in effect shall be commenced
and an order for relief entered or such proceeding shall not be dismissed or
discharged within sixty (60) calendar days of commencement.
5.2 Rights of Lender upon Default.
(a) Acceleration. Upon the occurrence or existence of any
Event of Default described in Sections 5.1(d) and 5.1(e), automatically and
without notice or, at the option of Lender, upon the occurrence of any other
Event of Default, all outstanding Obligations payable by Borrower hereunder
shall become immediately due and payable, without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the other Loan Documents to the contrary
notwithstanding.
(b) Cumulative Rights, etc. The rights, powers and
remedies of Lender under this Loan Agreement shall be in addition to all rights,
powers and remedies given to Lender by virtue of any applicable law, rule or
regulation of any Governmental Authority, any transaction contemplated thereby
or any other agreement, all of which rights, powers, and remedies shall be
cumulative and may be exercised successively or concurrently without impairing
Lender's rights hereunder.
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ARTICLE 6
MISCELLANEOUS
6.1 Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lender or Borrower under this Agreement or the other Loan Documents shall be in
writing and telecopied, mailed or delivered to each party at its telecopier
number or address set forth below (or to such other telecopier number or address
for any party as indicated in any notice given by that party to the other
party). All such notices and communications shall be effective (a) when sent by
Federal Express or other overnight service of recognized standing, on the
Business Day following the deposit with such service; (b) when mailed by
registered or certified mail, first class postage prepaid and addressed as
aforesaid through the United States Postal Service, upon receipt; (c) when
delivered by hand, upon delivery; and (d) when telecopied, upon confirmation of
receipt; provided, however, that any notice delivered to Lender under Article 2
shall not be effective until received by Lender.
LENDER: Networks Associates Inc.
3965 Freedom Circle
Santa Clara, California 95054
Attention: Prabat Goyal
BORROWER: McAfee.com Corporation
2805 Bowers Avenue
Santa Clara, California 95051
Attention: Evan Collins
6.2 Waivers; Amendments. Any term, covenant, agreement or
condition of this Loan Agreement or any other Loan Document may be amended or
waived if such amendment or waiver is in writing and is signed by Borrower and
Lender. No failure or delay by Lender in exercising any right hereunder shall
operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right. A waiver or consent given hereunder shall be effective
only if in writing and in the specific instance and for the specific purpose for
which given.
6.3 Successors and Assigns. This Loan Agreement and the other Loan
Documents shall be binding upon and inure to the benefit of Borrower, Lender and
their respective successors and permitted assigns, except that Borrower may not
assign or transfer (and any such attempted assignment or transfer shall be void)
any of its rights or obligations under any Loan Document without the prior
written consent of Lender.
6.4 Set-off. In addition to any rights and remedies of Lender
provided by law, Lender shall have the right, without prior notice to Borrower,
any such notice being expressly waived by Borrower to the extent permitted by
applicable law, upon the occurrence and during the continuance of a Default or
an Event of Default, to set-off and apply against any Indebtedness, whether
matured or unmatured, of Borrower to Lender (including, without limitation, the
Obligations), any amount owing from Lender to Borrower. The aforesaid right of
set-off may be exercised by Lender against Borrower or against any trustee in
bankruptcy, debtor-in-possession,
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assignee for the benefit of creditors, receiver or execution, judgment or
attachment creditor of Borrower or against anyone else claiming through or
against Borrower or such trustee in bankruptcy, debtor-in- possession, assignee
for the benefit of creditors, receiver, or execution, judgment or attachment
creditor, notwithstanding the fact that such right of set-off shall not have
been exercised by Lender prior to the occurrence of a Default or an Event of
Default. Lender agrees promptly to notify Borrower after any such set-off and
application made by Lender, provided that the failure to give such notice shall
not affect the validity of such set-off and application.
6.5 No Third Party Rights. Nothing expressed in or to be implied
from this Agreement or any other Loan Document is intended to give, or shall be
construed to give, any Person, other than the parties hereto and thereto and
their permitted successors and assigns, any benefit or legal or equitable right,
remedy or claim under or by virtue of this Agreement or any other Loan Document.
6.6 Partial Invalidity. If at any time any provision of this Loan
Agreement or any of the Loan Documents is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions of the Loan
Agreement or such other Loan Documents, nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction, shall
in any way be affected or impaired thereby.
6.7 Governing Law. This Loan Agreement and each of the other Loan
Documents shall be governed by and construed in accordance with the laws of the
State of California without reference to conflicts of law rules.
6.8 Construction. Each of this Loan Agreement and the other Loan
Documents is the result of negotiations among, and has been reviewed by,
Borrower, Lender and their respective counsel. Accordingly, this Loan Agreement
and the other Loan Documents shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against Borrower or
Lender.
6.9 Entire Agreement. This Loan Agreement and the other Loan
Documents, taken together, constitute and contain the entire agreement of
Borrower and Lender with respect to the subject matter hereby and supersede any
and all prior agreements, negotiations, correspondence, understandings and
communications among the parties, whether written or oral, respecting the
subject matter hereof.
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IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of
the date first set forth above.
BORROWER:
McAFEE.COM CORPORATION
By: /S/ SRIVATS SAMPATH
-----------------------------------
Name:
Title:
LENDER:
NETWORKS ASSOCIATES, INC.
By: /S/ PRABHAT GOYAL
-----------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 10.10
TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement") is made by and between
Network Associates, Inc. ("NAI") and each of the other entities listed on
Schedule A annexed hereto, as amended from time to time.
WHEREAS, NAI is the parent of an affiliated group of corporations, as
defined in section 1504(a) of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, NAI, on behalf of its affiliated group, is required to file
consolidated federal income tax returns in accordance with section 1501 of the
Code and may be required to file consolidated federal income tax returns for
subsequent taxable years; and
WHEREAS, the parties wish to provide for the allocation between them of
consolidated federal income tax liability, state and local income tax liability,
and certain related matters.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements contained herein, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the terms set forth below shall be
defined as follows:
(a) "Group" shall mean Parent (as hereinafter defined) and
all other corporations (whether now existing or hereafter formed or acquired)
that are required to join with Parent in filing a consolidated federal income
tax return.
(b) "Group Tax Liability" shall mean the consolidated federal
income tax liability of the Group reported on the Group's consolidated federal
income tax return filed for the taxable year.
(c) "Member" shall mean any corporation that is required to
join with Parent in filing a consolidated federal income tax return, as listed
on Schedule A, as amended from time to time.
(d) "Parent" shall mean (i) NAI, (ii) any successor common
parent corporation described in Treas. Reg. Section 1.1502-75(d)(2)(i) or (ii),
or (iii) any corporation as to which Parent (or a successor corporation
described in clause (ii) hereof) is the "predecessor" within the meaning of
Treas. Reg. Section 1.1502-1(f)(1), if such corporation acquires NAI (or a
successor corporation described in clause (ii) hereof) in a "reverse
acquisition" within the meaning of Treas. Reg. Section 1.1502-75(d)(3).
(e) "Separate Return Tax Liability" shall mean with respect to
any Member for any taxable year the hypothetical federal income tax liability of
such Member determined on a pro forma basis as if such Member had filed its own
separate federal income tax return for such year and
<PAGE> 2
calculated by (i) taking into account only losses, credits, carryovers of losses
and credits from prior or subsequent years, and other tax attributes of the
Member (determined without reference to the effect of the application of the
consolidated return regulations on the Member's attributes), all of which
attributes are subject to the limitations of the Code that would have been
applicable had the Member filed a separate federal income tax return for all
taxable years relating to the computation, (ii) imposing a tax on the taxable
income of the Member at a rate equal to the rate specified by the Code for the
taxable year under each applicable tax provision (including without limitation
the taxes imposed under Sections 11, 55 and 1201(a) of the Code), without surtax
exemptions, and (iii) employing the methods and principles of accounting,
elections and conventions that are used by the Group. The Separate Return Tax
Liability of a Member shall include any interest or penalties that would have
been shown as due had such Member filed a separate federal income tax return for
the taxable year in accordance with this subparagraph (e).
2. FILING OF RETURNS.
(a) Parent shall, on a timely basis, file or cause to be
filed, consolidated federal income tax returns and estimated tax returns for
each taxable year during the term of this Agreement and shall pay in full any
tax shown as due thereon. Each Member shall execute and file such consents,
elections, and other documentation as may be required or appropriate for the
proper filing of such returns. Each Member shall also maintain such books and
records and provide such information as Parent may request in connection with
the matters contemplated by this Agreement.
(b) Parent shall have the right, in its sole discretion, to
(i) make any elections which are employed in the filing of such returns,
including any elections denominated as such in the Code and choice of methods of
accounting and depreciation; (ii) determine the manner in which such returns
shall be prepared and filed, including without limitation, the manner in which
any item of income, gain, loss, deduction or credit shall be reported; (iii)
contest, compromise or settle any adjustment or deficiency proposed, asserted or
assessed as a result of any audit of any such returns; (iv) file, prosecute,
compromise or settle any claim for refund; and (v) determine whether any refunds
to which the Group may be entitled shall be paid by way of refund or credit
against the federal income tax liability of the Group.
(c) The Group will jointly file state, local and foreign tax
returns on a combined, consolidated, unitary, or other method that Parent
determines in its sole discretion results in a lower overall tax liability for
the Group. In the event any such state or local tax returns are filed, all of
the provisions of this Agreement shall apply to the extent determined by Parent
to the allocation, preparation, filing and payment related to such state and
local taxes and returns and shall be applied as is appropriate in the context of
the applicable state and local tax laws as determined in the sole discretion of
Parent, provided, further, that any benefit realized by the filing of such state
and local returns shall remain with Parent.
3. PAYMENTS.
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For each taxable year of the Group with respect to which a consolidated
federal income tax return is filed, Each Member shall make payments to Parent in
the following manner:
(a) Each Member shall pay to Parent the amount of such
Member's Separate Return Tax Liability not later than five (5) days before the
date on which the Group's consolidated federal income tax return is required to
be filed (taking account of any extensions thereof).
(b) Each Member shall pay to Parent, not later than five (5)
days before the date such Member would be required to make a payment of
estimated federal income taxes were such Member to file a separate federal
income tax return for the taxable year (including any payment due at the time
any extension of time for the filing of such hypothetical return is obtained),
an amount, as determined by Parent in a manner consistent with paragraph 1(e),
equal to the portion of such Member's Separate Return Tax Liability that would
be due were that Member to file a separate federal income tax return for the
taxable year. The Quarterly Estimated Tax Payment shall be determined at the
Parent's sole discretion. Any payments made by a Member to Parent under this
subparagraph (b) with respect to a taxable year shall be applied to reduce the
amount, if any, owing by that Member under subparagraph (a) of this paragraph 3
with respect to such year. Any excess of such payments over the amount
determined under subparagraph (a) of this paragraph 3 for such year shall be
repaid by Parent to that Member not later than forty-five (45) days after the
date on which the Group's federal income tax return is filed or, to the extent
that such excess represents all or a part of a tax refund claimed by the Group,
not later than forty-five (45) days after the receipt of such refund.
4. CHANGES IN TAX LIABILITY.
(a) If with respect to any taxable year (i) the Group files an
amended consolidated federal income tax return reporting a consolidated federal
income tax liability different from the Group Tax Liability, (ii) the Group Tax
Liability or a Member's tax liability is adjusted and such adjustment is part of
a final "determination" as that term is defined in section 1313(a) of the Code,
or (iii) the Group is assessed and pays federal income taxes in excess of the
Group Tax Liability by reason of any of the events specified in section 6213(b)
or (d) of the Code, then the amounts of the payments required under paragraph 3
shall be recomputed, subject to the limitations of subparagraph (c) of this
paragraph 4, to give effect to such amended return, adjustment or assessment, as
the case may be. that Member shall then pay to Parent, or Parent shall then pay
to that Member, as the case may be, any difference between the amounts
determined by such recomputation and the amounts previously paid. Such payments
shall be made no later than (i) in the case of an additional payment of tax by
the Group due as a result of such amended return, adjustment or assessment, the
later of (a) five (5) days before the date on which such additional payment of
tax is due or (b) five (5) days after the date on which Parent notifies of the
amount of payment due from that Member pursuant to this subparagraph (a); or
(ii) where the Group receives a refund arising from such amended return or
adjustment, forty-five (45) days after the receipt of such refund.
(b) If with respect to any taxable year in which the Group
files an amended consolidated federal income tax return reporting a consolidated
federal income tax liability identical to the Group Tax Liability, then the
amounts of the payments required under paragraph 3, subject to the limitations
of subparagraph (c) of this paragraph 4, shall be recomputed to give effect to
such
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<PAGE> 4
amended return. Not later than forty-five (45) days after the filing of such
amended return, the affected Member shall pay to Parent, or Parent shall pay to
that Member, as the case may be, any difference between the amounts determined
by such recomputation and the amounts previously paid.
(c) If with respect to any taxable year a Member realizes a
loss or credit that would be permitted under the Code (taking into account any
election under section 172(b)(3) of the Code) to be carried to one or more
taxable years that precede such taxable year if such Member had filed a separate
federal income tax return for all such taxable years, then the amounts of the
payments required under paragraph 3 for such taxable years shall be recomputed
to give effect to such carryback; provided, however, that, notwithstanding
subparagraphs (a) and (b) of this paragraph 4, no such recomputation shall be
made with respect to any loss or credit carried back to a taxable year beginning
before the date hereof, or, if later, a taxable year in which such Member was
not a Member; provided, further, that no loss or credit that could be carried
back to a taxable year beginning before the date hereof in which such Member was
a Member shall be considered in determining such Member's Separate Return Tax
Liability for any other year. Such Member shall pay to Parent, or Parent shall
pay to such Member, as the case may be, any difference between the amounts
determined by such recomputation and the amounts previously paid not later than
forty-five (45) days after the date on which the Group's federal income tax
return for the taxable year is filed, or to the extent that such difference
represents all or part of a tax refund claimed by the Group, not later than five
(5) days after the receipt of such refund.
(d) The parties recognize that a recomputation under
subparagraphs (a), (b) or (c) of this paragraph 4 of the amounts of the payments
required under paragraph 3 for any taxable year will not necessarily be the
final determination of the amounts of such payments for such year, and the
amounts of such payments may be recomputed more than once.
(e) In the event that a change in the tax liability of the
Group arising from an amended return, adjustment or assessment described in
subparagraph (a) of this paragraph 4 results or will result in the receipt or
payment of interest, or the payment or recovery of penalties in excess of the
aggregate interest or penalties included in determining the aggregate Separate
Return Tax Liability of a Member, such interest or penalties shall be allocated
to such Member as follows: The total amount of such excess interest or penalty
shall be multiplied by a fraction, the denominator of which is the amount of the
change in the Group Tax Liability on which the interest or penalty is computed,
and the numerator of which is the amount of the change in such Member's
allocated tax liability, in both cases with respect to the most recent prior
computation of the Group Tax Liability and such Member's Separate Return Tax
Liability. Such Member shall pay to Parent, or Parent shall pay to such Member,
as the case may be, the excess interest or penalties allocated to such Member
pursuant to this subparagraph 4(e) at the same time the amounts payable pursuant
to subparagraph (a) of this paragraph 4 become payable.
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(f) Except as provided in paragraph 6, payments made pursuant
to subparagraphs (a), (b), (c), (d), or (e) of this paragraph 4 shall not
themselves bear interest.
5. INDEMNIFICATION.
(a) Each Member agrees to indemnify and hold harmless Parent
with respect to any liability for federal income taxes, including any interest
thereon, any additions to such taxes and assessable penalties imposed with
respect thereto (collectively "Taxes") to the extent that Parent's liability for
such Taxes is attributable to the failure of such Member to make the payments
required of it pursuant to paragraphs 3 and 4 of this Agreement or to the
failure of such subsidiary to comply with subparagraph (a) of paragraph 2 of
this Agreement.
(b) Parent agrees to indemnify and hold each Member harmless
with respect to any liability for federal income taxes, including any interest
thereon, any additions to such taxes and assessable penalties imposed with
respect thereto (collectively, "Taxes"), where such liability arises solely by
reason of such Member being severally liable for any taxes of the Group pursuant
to Treas. Reg. Section 1.1502-6; provided, however, that such Member shall not
be entitled to indemnification by Parent pursuant to this paragraph 5 unless
such Member has made all payments required of it pursuant to paragraph 3 and 4
of this Agreement and fully complied with subparagraph (a) of paragraph 2 of
this Agreement.
(c) Payment pursuant to the indemnity provided in this
paragraph 5 shall be made within ten (10) days of notice that a payment
requiring indemnification under this paragraph 5 has been made by the Parent.
6. DEFAULT INTEREST.
Where payment required by this Agreement to be made from one party to
another is not made within the time provided, the amount not timely paid shall
bear interest at the rate established pursuant to section 6621(a)(2) of the
Code.
7. TERMINATION OF AFFILIATION.
(a) In the event that a Member ceases to be included in the
Group but continues to be a corporation subject to federal income tax, this
Agreement, except as provided in paragraphs 5 and 7 of this Agreement, shall
terminate.
(b) Parent and each former Member shall consult and furnish
each other with information concerning the status of any tax audit or tax refund
claim relating to a taxable year in which such Member was a Member and a
consolidated federal income tax return was filed. Parent shall have the right to
make the final determination as to the response of the Group to any audit and
shall have the sole right to control, at its own expense, any contest of any
change proposed and any proposed disallowance of a refund claim by the Internal
Revenue Service through the Appeals Office of the Internal Revenue Service and
the courts in connection with any taxable year for which this Agreement is in
effect.
-5-
<PAGE> 6
(c) Each Member shall reimburse Parent to the extent that such
Member received a payment under this Agreement on account of (or payments made
by it under this Agreement were reduced by) any loss or credit that remains an
attribute of such Member (i.e., the loss or credit was not absorbed by the Group
in calculating the Group Tax Liability).
(d) Payments which would have been required under paragraphs 3
and 4 of this Agreement to or by a Member, were such Member still a Member, with
respect to those taxable years as to which such Member was a Member, shall be so
made in accordance with principles analogous to those set forth in such
paragraphs and at the times set forth therein; provided, however, that no such
payments shall be made on account of any loss or credit realized by a Member in
a year in which such Member was not a Member that may be carried back to a
taxable year in which a Member was a Member.
8. RESOLUTION OF DISPUTES.
Any dispute or ambiguity concerning the amount of any payment provided
for under this Agreement shall be resolved by Parent in a manner consistent with
the principles and procedures set forth in this Agreement. The judgment of
Parent shall be conclusive and binding upon each of the parties to this
Agreement.
9. EFFECTIVE DATE.
This Agreement shall be effective on the effective date of the
registration statement for Member's initial public offering of its common stock,
and shall remain in effect for each taxable year thereafter in which any Member
is included in a consolidated federal income tax return filed by Parent.
10. INFORMATION AND EXPENSES.
Parent is authorized to retain accountants and attorneys for the
purpose of preparing the Group's tax returns provided for herein, and each
Member agrees to pay all the costs incurred by such Member in furnishing
records, documents or information in the form requested by Parent in connection
with the preparation of any such returns. Each Member shall promptly provide
Parent with such records, documents and information as Parent shall request in
connection with the preparation of such returns. Parent shall be authorized to
retain accountants and attorneys for the purpose of preparing any of the refund
claims provided for herein, and of representation in connection with any Member
disputes with the IRS. In cases where the action taken is Member specific or
where any Member has agreed that the action taken is appropriate, such Member"
agrees to pay the costs reasonably allocated to it by Parent of employing such
attorneys and accountants (including associated court costs), and to bear the
costs incurred by it in furnishing records, documents and testimony in
connection with any such matter.
11. MISCELLANEOUS PROVISIONS.
(a) This Agreement contains the entire understanding of the
parties hereto with respect to the subject matter contained herein and
supersedes all prior written, oral or implied understandings, representations
and agreements among the parties with respect thereto. No
-6-
<PAGE> 7
alteration, amendment, or modification of any of the terms of this Agreement
shall be valid unless made by an instrument signed in writing by an authorized
officer of each party.
(b) This Agreement shall be binding upon and inure to the
benefit of each party hereto, its respective successors and assigns.
(c) This Agreement is not intended to benefit any person other
than the parties hereto, each of their respective successors and assigns. No
person not (i) a party or (ii) a party's successor or assign shall be a third
party beneficiary hereof.
(d) This Agreement shall be governed by, interpreted and
enforced in accordance with the laws of the State of California (regardless of
the laws that might be applicable under principles of conflicts of laws).
(e) This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) The descriptive headings of the paragraphs of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.
(g) Any notice or other communication required or permitted
under this Agreement shall be in writing and shall be personally delivered or
sent by certified or registered United States mail, postage prepaid, to the
parties at the following addresses (or at such other address as a party may
specify by notice to the others):
If to Parent:
Network Associates, Inc.
---------------------
---------------------
---------------------
If to a Member:
See the address set forth on Schedule A
Any such notice or communication shall be effective and be deemed to
have been given as of the dates delivered or mailed, as the case may be;
provided that any notice or communication changing any of the addresses set
forth above shall be effective and deemed to have been given only upon its
receipt.
(h) Where the context so requires, the word "person" shall
include a corporation, firm, partnership or other form of association or entity.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date set forth below, with the effective date as to each
Member the date such Member joined the Group.
NETWORK ASSOCIATES, INC.
By: /s/ PRABHAT K. GOYAL
----------------------------
Date:
McAFEE.COM CORPORATION
By: /s/ SRIVATS SAMPATH
----------------------------
Date:
<PAGE> 9
SCHEDULE A
LIST AND ADDRESSES OF MEMBER CORPORATIONS
McAfee.com Corporation
<PAGE> 1
EXHIBIT 10.11
INDEMNIFICATION AND VOTING AGREEMENT
This Indemnification and Voting Agreement (this "AGREEMENT") between
McAfee.com Corporation, a Delaware corporation ("MCAFEE.COM"), and Networks
Associates, Inc., a Delaware corporation ("NAI"), is entered into on August 20,
1999, and shall be effective immediately upon the effective date of the initial
public offering of McAfee.com's common stock (the "EFFECTIVE DATE").
RECITALS
WHEREAS, NAI has contributed substantially all the assets of its former
consumer e-commerce division to McAfee.com in accordance with the Asset
Contribution and Receivables Settlement Agreement effective as of January 1,
1999 between the parties (the "ASSET CONTRIBUTION AGREEMENT").
WHEREAS, McAfee.com is considering an initial public offering of its
stock.
WHEREAS, the parties desire to set forth certain agreements regarding
indemnification and voting.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I.
INDEMNIFICATION
SECTION 1.1. INDEMNIFICATION BY NAI.
(a) NAI Indemnification. NAI agrees, for itself and as agent for each
of its subsidiaries, to indemnify, defend (or, where applicable, pay the defense
costs for) and hold harmless McAfee.com from and against any and all claims,
losses, expenses, liabilities or other damages, including reasonable attorneys'
fees and costs of investigation, to the extent of the amount of such claim,
loss, expense, liability or other damage (collectively "LOSSES") related to any
Third Party Claim (as defined in Section 1.2(a) hereof) (whether known or
unknown) relating to events or circumstances arising out of the actions or
inaction of NAI or its subsidiaries, or their respective officers, directors or
employees on or prior to the Effective Date.
(b) Matters Not Covered. Notwithstanding the foregoing, NAI shall have
no obligation to indemnify McAfee.com for (i) any obligations, payments,
royalties or fees owed by or assumed by McAfee.com to NAI pursuant to any of the
intercompany agreements entered into by the parties prior to the Effective Date;
(ii) any Losses resulting from Third Party Claims that are related to
intellectual property developed by McAfee.com from the date hereof until the
Effective Date; (iii) any obligations incurred by McAfee.com in the ordinary
course of business; (iv) any Losses resulting from Third Party Claims made
against McAfee.com alleging infringement of intellectual property rights unknown
to the parties as of the Effective Date, which should be resolved pursuant to
the separate technology cross license agreement between the parties; or (v) any
Losses resulting from Third Party Claims related to, arising out of or resulting
from any untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading by
McAfee.com, with respect to all information contained in any registration
statement or any preliminary, final or supplemental prospectus forming a part of
a registration statement filed by McAfee.com pursuant to the Securities Act of
1933, as amended.
<PAGE> 2
(c) Subsequent Losses Offset. In the event that NAI makes a payment to
McAfee.com hereunder, and McAfee.com subsequently diminishes the Losses on
account of which such payment was made, either directly or through a third-party
recovery, McAfee.com will promptly repay NAI the amount by which the payment
made by McAfee.com exceeds the actual cost of the indemnified Losses.
SECTION 1.2. PROCEDURES FOR DEFENSE, SETTLEMENT AND
INDEMNIFICATION OF THIRD PARTY CLAIMS.
(a) Notice of Claims. If McAfee.com shall receive notice or otherwise
learn of the assertion by a person (including any governmental authority) who is
not NAI or any subsidiary of NAI of any claim or of the commencement by any such
person of any action (collectively, a "THIRD PARTY CLAIM") with respect to which
NAI may be obligated to provide indemnification to McAfee.com pursuant to
Section 1.1, McAfee.com shall give such NAI written notice thereof within ten
(10) days after becoming aware of such Third Party Claim. Any such notice shall
describe the Third Party Claim in reasonable detail. Notwithstanding the
foregoing, the delay or failure of McAfee.com to give notice as provided in this
Section 1.2(a) shall not relieve NAI of its obligations under this Article I,
except to the extent that NAI is actually prejudiced by such delay or failure to
give notice.
(b) Claims Involving Commingled Products or Employees. If a Third Party
Claim involves a commingled product with components supplied by both NAI and
McAfee.com, or any similar claims involving both the NAI business and McAfee.com
business (collectively, "COMMINGLED CLAIMS"), NAI, after reasonable consultation
with McAfee.com, shall have the power to resolve whether and to the extent any
Commingled Claim is a Loss to be indemnified by NAI pursuant to Section 1.1
hereof.
(c) Defense of Claims. With respect to any Third Party Claims arising
prior to the Effective Date, NAI shall manage the defense of, and may seek to
settle or compromise, any such Third Party Claims.
(d) Cooperation in Defense and Settlement. With respect to any Third
Party Claim that implicates both NAI and McAfee.com in a material fashion due to
the allocation of Losses, responsibilities for management of defense, the
parties agree to cooperate fully and maintain a joint defense (in a manner that
will preserve the attorney-client privilege with respect thereto) so as to
minimize such Losses and defense costs associated therewith. The party that is
not responsible for managing the defense of such Third Party Claims shall, upon
reasonable request, be consulted with respect to significant matters relating
thereto and may, if necessary or helpful, associate counsel to assist in the
defense of such claims.
(e) Dispute Resolution. If McAfee.com has any dispute, disagreement or
claim arising out of or relating to this Agreement or to a breach hereof,
including NAI's interpretation, performance or termination, McAfee.com shall
promptly deliver a written notice to NAI of such dispute, disagreement or claim.
Within ten (10) business days following McAfee.com's delivery of written notice
of dispute, disagreement or claim, NAI shall either pay to McAfee.com the amount
in dispute, or object in writing to McAfee.com. If such objection is made by
NAI, the parties shall enter into good faith negotiations to resolve the
dispute, disagreement or claim in a timely manner.
SECTION 1.3. ADDITIONAL MATTERS.
(a) Substitution. In the event of an action in which NAI or a
subsidiary of NAI (other than McAfee.com) is not a named defendant, if NAI or
McAfee.com shall so request, the parties shall endeavor to substitute NAI (or a
designated subsidiary) for McAfee.com. If such substitution or addition cannot
be achieved for any reason or is not requested, the rights and obligations of
the parties regarding indemnification and the management of the defense of
claims as set forth in this Article I shall not be altered.
<PAGE> 3
(b) Subrogation. In the event of payment by or on behalf of NAI to or
on behalf of McAfee.com in connection with any Third Party Claim, NAI shall be
subrogated to and shall stand in the place of McAfee.com, in whole or in part
based upon whether NAI has paid all or only part of McAfee.com's Loss, as to any
events or circumstances in respect of which McAfee.com may have any right,
defense or claim relating to such Third Party Claim against any claimant or
plaintiff asserting such Third Party Claim or against any other person.
McAfee.com shall cooperate with NAI in a reasonable manner, and at the cost and
expense of NAI, in prosecuting any subrogated right, defense or claim.
<PAGE> 4
ARTICLE II.
VOTING FOR DIRECTORS
SECTION 2.1. VOTING AGREEMENT. For so long as NAI, or any of its
subsidiaries (other than McAfee.com) continues to hold at least twenty percent
(20%) of the outstanding voting power of McAfee.com, NAI agrees to vote its
share of McAfee.com's capital stock in favor of the election of two (2)
independent directors as the term "independent director" is defined in Rule 4200
of the Nasdaq Stock Market Marketplace Rules.
ARTICLE III.
MISCELLANEOUS
SECTION 3.1. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and shall supersede all prior written and oral and all contemporaneous oral
agreements and understandings with respect to the subject matter hereof.
SECTION 3.2. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware as to all
matters regardless of the laws that might otherwise govern under principles of
conflicts of laws applicable thereto.
SECTION 3.3. NOTICES. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one (1) business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one (1) business day after being deposited with
an overnight courier service or (v) four (4) days after being deposited in the
U.S. mail, First Class with postage prepaid, and addressed to the attention of
the party's General Counsel at the address of its principal executive office or
such other address as a party may request by notifying the other in writing.
SECTION 3.4 OTHER AGREEMENTS EVIDENCING INDEMNIFICATION
OBLIGATIONS. NAI hereby agrees to execute, for the benefit of McAfee.com, such
documents as may be reasonably requested by McAfee.com, evidencing NAI's
agreement that the indemnification obligations of NAI set forth in this
Agreement inure to the benefit of and are enforceable by McAfee.com.
SECTION 3.5. BINDING EFFECT; Assignment. The rights and obligation
in this Agreement may not be assigned by any party hereto without the express
prior written consent of the other party hereto.
SECTION 3.6. SEVERABILITY. If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is determined by a
nonappealable decision by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the
<PAGE> 5
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the fullest
extent possible.
SECTION 3.7. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay
on the part of either party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any single
or partial exercise of any such right preclude other or further exercise thereof
or of any other right.
SECTION 3.8. Amendment. No change or amendment will be made to
this Agreement except by an instrument in writing signed on behalf of each of
the parties to this Agreement.
SECTION 3.9. AUTHORITY. Each of the parties hereto represents to
the other that (a) it has the corporate or other requisite power and authority
to execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement by it have been duly authorized by all necessary
corporate or other action, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.
SECTION 3.10. INTERPRETATION. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the date
first above written.
NETWORKS ASSOCIATES, INC.
By: /s/ PRABHAT K. GOYAL
------------------------
Name: Prabhat K. Goyal
Title: Vice-President, Chief
Financial Officer
MCAFEE.COM CORPORATION
By: /s/ SRIVATS SAMPATH
------------------------
Name: Srivats Sampath
Title: Chief Executive Officer
<PAGE> 1
EXHIBIT 10.12
JOINT COOPERATION AND MASTER SERVICES AGREEMENT
This JOINT COOPERATION AND MASTER SERVICES AGREEMENT (this "Agreement")
is made and entered into this 1st day of January, 1999 (the "Effective Date"),
by and between Networks Associates, Inc., a corporation organized and existing
under the laws of the State of Delaware, and having its principal place of
business at 3965 Freedom Circle, Santa Clara, CA 95054, (hereinafter referred to
as "NAI"), and McAfee.com, a corporation organized and existing under the laws
of the State of Delaware and having its principal place of business at 3965
Freedom Circle, Santa Clara, CA 95054 ("McAfee.com").
RECITALS
WHEREAS, the parties have determined to separate McAfee.com, formerly a
wholly-owned subsidiary of NAI, into a separate, publicly traded company, and
WHEREAS, the parties desire that McAfee.com and NAI provide each other
with certain technology services on an ongoing basis.
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING AND THE MUTUAL
COVENANTS AND AGREEMENTS CONTAINED HEREIN, THE PARTIES HERETO HEREBY AGREE AS
FOLLOWS:
SECTION 1
DEFINITIONS; STRUCTURE OF AGREEMENT
1.1 Definitions. For the purpose of this Agreement, the following
capitalized terms shall have the following meanings:
(a) "Additional Services" shall have the meaning set forth in
Section 1.2.
(b) "Confidential Information" means all documents,
disclosures and written or oral statements disclosed by a
party (the "Disclosing Party" ) to the other party (the
"Receiving Party") shall be deemed "Confidential
Information" unless clearly marked otherwise or if the
information in such documents, disclosures or statements
is non-confidential pursuant to Section 8 below. Except as
provided herein, "Confidential Information" shall include,
without limitation, proprietary, technical, marketing,
operating, performance, cost, business pricing policies,
programs, inventions, discoveries, trade secrets,
techniques, processes, computer programming techniques,
and all record bearing media containing or disclosing such
information and techniques disclosed pursuant to this
Agreement. Any source code or unlinked object files or
modules disclosed by the Disclosing Party to the Receiving
Party shall be deemed "Confidential Information" unless it
is clearly and in writing marked as "Non-Confidential."
<PAGE> 2
(c) "Impracticable" shall have the meaning set forth in
Section 5.1.
(d) "Providing Company" shall mean, with respect to any
particular Service, the party or its Subsidiaries
identified on the applicable Schedule 1 as the party to
provide such Service.
(e) "Receiving Company" shall mean, with respect to any
particular Service, the party or its Subsidiaries
identified on the applicable Schedule 1 as the party to
receive such Service.
(f) "System" shall mean the software, hardware, data store or
maintenance and support components or portions of such
components of a set of information technology assets
identified in the applicable Statement of Work attached
hereto.
(g) "Technology Cross License Agreement" shall mean that
certain Technology Cross License Agreement between the
parties of even date herewith.
1.2 Agreement Structure. This Agreement is a master agreement for
various services. The Agreement consists of this base agreement containing the
basic terms which shall govern the overall relationship between the parties and
the following schedules (the "SCHEDULES") which outline the terms upon which the
Providing Company shall render specific services (the "SERVICES") to the
Receiving Company and which Schedules are integrated herein by this reference:
Schedule A: [Hosting Services]
Additional Schedules for additional Services ("Additional Services")
may be added to this Agreement after the Effective Date by the mutual agreement
of the parties hereto, which agreement will be evidenced by mutual execution of
a Schedule which references this Agreement. Each additional Schedule for new
Services shall be subject to the terms and conditions of this Agreement. IN THE
EVENT OF A CONFLICT BETWEEN THE TERMS OF THIS AGREEMENT AND A SCHEDULE, THE
TERMS OF THE SCHEDULE SHALL SUPERSEDE THE CONFLICTING PROVISIONS CONTAINED IN
THIS BASE AGREEMENT.
Any Schedule may be amended by the mutual agreement of the parties
hereto, which amendment shall be memorialized in a revised Schedule (the
"REVISED SCHEDULE") executed by the Parties.
1.3 Statements of Work. There may be multiple projects under any
one Schedule, the details of which shall be outlined in one or more Exhibits to
such Schedule (each, a "STATEMENT OF WORK"). Each such Statement of Work shall
reference this Agreement, shall be executed by the both of the Parties; and
shall be subject to the terms and conditions of this Agreement.
SECTION 2
Services
2.1 Services Generally. Except as otherwise provided herein,
during the term of this Agreement, Providing Company shall provide or cause to
be provided to Receiving Company the services described in the Schedules
attached hereto. The service described on a single Statement of Work shall be
referred to herein as a "Service". Collectively, the services described on all
the Statements of Work shall be referred herein as "Services".
<PAGE> 3
2.2 AVERT Services. During the term of the Technology Cross
License Agreement, and at no additional cost to McAfee.com, NAI shall cause
NAI's anti-virus emergency response team ("AVERT") to provide information,
research and development services to McAfee.com equivalent in all material
respects to those afforded NAI including, without limitation, all available
notice, research, solutions furnished by AVERT to NAI with respect to AVERT Data
(defined below). Furthermore, NAI shall, and shall cause AVERT to mention, in
any public announcement made by NAI or AVERT with respect to AVERT Data, both
NAI and McAfee.com as potential sources of virus information and solutions. For
purposes of the foregoing, "AVERT Data" means all information regarding computer
viruses and all available research and solution furnished by AVERT to NAI with
respect to any NAI product to which McAfee.com has a license pursuant to the
Technology Cross License Agreement or to any McAfee.com product to which NAI has
a license pursuant to the Technology Cross License Agreement.
SECTION 3
COMPENSATION.
3.1 Charges for Services. Receiving Company shall pay Providing
Company the charges, if any, set forth on the Statement of Work for each of the
Services listed therein. The parties shall use good faith efforts to discuss any
situation in which the actual charge for a Service is reasonably expected to
exceed the estimated charge, if any, set forth on a Statement of Work for a
particular Service, provided, however, that any charges incurred in excess of
any such estimate shall not justify stopping the provision of, or payment for,
Services under this Agreement.
3.2 Payment Terms. Providing Company shall bill Receiving Company
monthly for all charges pursuant to this Agreement. Such bills shall be
accompanied by reasonable documentation or other reasonable explanation
supporting such charges. Receiving Company shall pay Providing Company for all
Services provided hereunder within thirty (30) days after receipt of an invoice
therefor. Invoices for Services provided hereunder shall be sent monthly by the
Providing Company unless otherwise agreed in a Statement of Work.
3.3 Pricing Adjustments. In the event of a tax audit adjustment
relating to the pricing of any or all Services provided pursuant to this
Agreement in which it is determined by a taxing authority that any of the
charges, individually or in combination, did not result in an arm's-length
payment, as determined under any applicable arm's-length standards, then the
parties, including a Providing Company subcontractor providing or receiving
Services hereunder, may agree to make corresponding adjustments to the charges
in question for such period to the extent necessary to achieve arm's-length
pricing. Any adjustment made pursuant to this Section 3.4 shall be reflected in
the parties, official books and records, and the resulting overpayment or
underpayment shall create an obligation to be paid in the manner specified in
Section 3.2.
SECTION 4
General Obligations; Standard of Care.
4.1 Performance Metrics: Providing Company. Specific performance
metrics for the Providing Company for a specific Service may be set forth in the
corresponding Statement of Work. Where none is set forth, the Providing Company
shall use reasonable efforts to provide Services in accordance with its
policies, procedures and practices then in effect and shall exercise the same
care and skill as it exercises in performing similar services for itself.
4.2 Disclaimer of Warranties. PROVIDING COMPANY MAKES NO
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE
IMPLIED
<PAGE> 4
WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR A PARTICULAR
PURPOSE, WITH RESPECT TO THE SERVICES PROVIDED BY IT HEREUNDER.
4.3 Performance Metrics: Receiving Company. Receiving Company
shall use reasonable efforts, in connection with receiving Services, to follow
the policies, procedures and practices in effect before the date hereof
including providing information and documentation sufficient for Providing
Company to perform the Services as they were performed before the date hereof
and making available, as reasonably requested by the Providing Company,
sufficient resources and timely decisions, approvals and acceptances in order
that Providing Company may accomplish its obligations hereunder in a timely
manner.
4.4 Transitional Nature of Services; Changes. The parties
acknowledge the transitional nature of the Services and that Providing Company
may make changes from time to time in the manner of performing the Services if
Providing Company is making similar changes in performing similar services for
itself and if Providing Company furnishes to Receiving Company reasonable notice
regarding such changes. Notwithstanding the foregoing, for a period of eighteen
(18) months from the Effective Date, Providing Company will not make any
material change to Systems affecting Receiving Company without first providing
thirty (30) days prior written notice and obtaining Receiving Company's prior
written consent, which consent shall not be unreasonably withheld or delayed.
4.5 Responsibility for Errors; Delays. Providing Company's sole
responsibility to Receiving Company:
(a) for errors or omissions in Services, shall be to furnish
correct information, payment and/or adjustment in the Services, at no additional
cost or expense to Receiving Company; provided, Receiving Company must promptly
advise Providing Company of any such error or omission of which it becomes aware
after having used reasonable efforts to detect any such errors or omissions;
(b) for failure to deliver any Service because of
Impracticability, shall be to use reasonable efforts to make the Services
available and/or to resume performing the Services as promptly as reasonably
practicable.
4.6 Good Faith Cooperation; Consents. The parties will use good
faith efforts to cooperate with each other in all matters relating to the
provision and receipt of Services. Such cooperation shall include exchanging
information, providing electronic access to Systems used in connection with
Services, performing true-ups and adjustments and obtaining all third party
consents, licenses, sublicenses or approvals necessary to permit each party to
perform its obligations hereunder (including without limitation, rights to use
third party software needed for the performance of Services). The costs of
obtaining such third party consents, licenses, sublicenses or approvals shall be
borne by the Receiving Company. The parties will maintain documentation
supporting the information contained in the Statements of Work and cooperate
with each other in making such information available as needed in the event of a
tax audit, whether in the United States or any other country.
4.7 Alternatives. If Providing Company reasonably believes it is
unable to provide any Service because of a failure to obtain necessary consents,
licenses, sublicenses or approvals pursuant to Section 4.6 or because of
Impracticability, the parties shall cooperate to determine the best alternative
approach. Until such alternative approach is found or the problem otherwise
resolved to the satisfaction of the parties, the Providing Company shall use
reasonable efforts to continue providing the Service or, in the case of Systems,
to support the function to which the System relates or permit Receiving Company
to have access to the
<PAGE> 5
System so Receiving Company can support the function itself. To the extent an
agreed upon alternative approach requires payment above and beyond that which is
included in the Providing Company's charge for the Service in question, the
parties shall share equally in making any such payment unless they otherwise
agree in writing.
SECTION 5
Certain Limitations.
5.1 Impracticability. Providing Company shall not be required to
provide any Service to the extent the performance of such Service becomes
"Impracticable" as a result of a cause or causes outside the reasonable control
of Providing Company including unfeasible technological requirements, or to the
extent the performance of such Services would require Providing Company to
violate any applicable laws, rules or regulations or would result in the breach
of any software license or other applicable contract.
5.2 Additional Resources. Except as provided in a Statement of
Work for a specific Service, in providing the Services, Providing Company shall
not be obligated to: (i) hire any additional employees; (ii) maintain the
employment of any specific employee; (iii) purchase, lease or license any
additional equipment or software; or (iv) pay any costs related to the transfer
or conversion of Receiving Company's data to Receiving Company or any alternate
supplier of Services.
SECTION 6
TERM; TERMINATION
6.1 Term. The term of this Agreement shall commence on the
Effective Date and shall remain in effect in for a period of three (3) years
unless earlier terminated under this Section 6. The duration of any Services
pursuant to a Statement of Work may be set forth in such Statement. This
Agreement may be extended by the parties in writing either in whole or with
respect to one or more of the Services, provided, however, that such extension
shall only apply to the Services for which the Agreement was extended. The
parties shall be deemed to have extended this Agreement with respect to a
specific Service if the Statement of Work for such Service specifies a
completion date beyond the aforementioned Expiration Date. The parties may agree
on an earlier expiration date respecting a specific Service by specifying such
date on the Schedule 1 for that Service. Services shall be provided up to and
including the date set forth in the applicable Statement of Work, subject to
earlier termination as provided herein.
6.2 Termination. In addition, subject to the provisions of Section
11 below, either party may terminate this Agreement with respect to a specific
Service if the other party materially breaches a material provision with regard
to that particular Service and does cure such breach (or take reasonable steps
required under the circumstances to not cure such breach going forward) within
sixty (60) business days after being given notice of the breach; provided,
however, that the non-terminating party may request that the parties engage in a
dispute resolution negotiation as specified in Section 11 below prior to
termination for breach.
6.3 Survival. The following sections will survive any termination
or expiration of this Agreement: 1, 2.3, 4.2, 6.3, 6.4, 7, 8.2, 9, 10, 11 and
12. Notwithstanding the foregoing, in the event of any termination with respect
to one or more, but less than all Services, this Agreement shall continue in
full force and effect with respect to any Services not terminated hereby.
<PAGE> 6
6.4 User Ids, Passwords. The parties shall use good faith efforts
at the termination or expiration of this Agreement or any specific Service
hereto, to ensure that all applicable user IDs and passwords are canceled and
that any applicable data pertaining solely to the other parties are deleted or
removed from Systems.
6.5 Subcontractors. Providing Company may engage a "Subcontractor"
to perform all or any portion of Providing Company's duties under this
Agreement, provided that any such Subcontractor agrees in writing to be bound by
confidentiality obligations at least as protective as the terms of Section 10
regarding confidentiality below, and provided further that Providing Company
remains responsible for the performance of such Subcontractor. As used in this
Agreement, "Subcontractor" will mean any individual, partnership, corporation,
firm, association, unincorporated organization, joint venture, trust or other
entity engaged to perform hereunder.
SECTION 7
Indemnification.
7.1 Indemnification. Each party will indemnify and hold harmless
the other party and its directors, officers, employees and agents from any
claims, losses, attorneys' fees, damages, liabilities, costs, expenses, or suits
for bodily injury to any person (including employees or agents), physical damage
to or loss of tangible property arising out of or resulting from any act or
omission of the other party, its employees, agents or subcontractors arising
from the performance of this Agreement; provided the indemnified party provides
the indemnifying party with (i) prompt written notice of any such claim; (ii)
reasonable cooperation in the defense of such claim (at the indemnifying party's
sole expense) and (ii) sole control of the defense or settlement of any such
claim. In no event, however, will either party be responsible for the sole
negligence of the other party.
7.2 Infringement Defense. To the extent Providing Company delivers
or licenses any intellectual property to Receiving Company in performance of
this Agreement, Providing Company's duty to defend Receiving Company against all
claims incurred by Receiving Company based upon infringement of a third party
patent or other intellectual property right shall be in accordance with the
Technology Cross License Agreement.
SECTION 8
Intellectual Property
8.1 Software Deliverables. Unless otherwise agreed by the parties
under a separate license or technology agreement, if Providing Company supplies
Receiving Company with a deliverable that in whole or in part consists of
software, firmware, or other computer code (referred to as a "Software
Deliverable"), such Software Deliverables will be supplied in object code form
only and will be subject to the Technology Cross License Agreement.
8.2 Ownership. This Agreement and the performance of this
Agreement will not affect the ownership of any copyrights or other intellectual
property rights existing prior to the Effective Date. Neither party will gain,
by virtue of this Agreement, any rights of ownership of copyrights, patents,
trade secrets, trademarks or any other intellectual property rights owned by the
other. Providing Company will own all
<PAGE> 7
copyrights, patents, trade secrets, trademarks and other intellectual property
rights subsisting in the Software Deliverables and other works developed by
Providing Company for purposes of this Agreement.
SECTION 9
Confidentiality
9.1 Confidential Information. Except as expressly provided herein,
the parties agree that, for the term of this Agreement and for five (5) years
thereafter, the receiving party shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose except for the
purposes contemplated by this Agreement any Confidential Information furnished
to it by the disclosing party hereto, except that to the extent that it can be
established by the receiving party by written proof that such Confidential
Information: was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure;
(a) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;
(b) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; or
(c) was subsequently lawfully disclosed to the receiving party
by a person other than a party hereto.
9.2 Permitted Use and Disclosures. Each party hereto may use or
disclose information disclosed to it by the other party to the extent such use
or disclosure is reasonably necessary in complying with applicable law or
governmental regulations, or exercising its rights hereunder to develop or
commercialize the products licensed pursuant to the Technology Cross License
Agreement, provided that if a party is required to make any such disclosure of
another party's confidential information, other than pursuant to a
confidentiality agreement, it will give reasonable advance notice to the latter
party of such disclosure and, will use its best efforts to secure confidential
treatment of such information prior to its disclosure (whether through
protective orders or otherwise).
9.3 Confidential Terms. Except as expressly provided herein, each
party agrees not to disclose any terms of this Agreement to any third party
without the consent of the other party; provided, disclosures may be made as
required by securities or other applicable laws, or to actual or prospective
corporate partners, or to a party's accountants, attorneys and other
professional advisors.
SECTION 10
Limitation of Liability.
10.1 Exclusion of Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT
OR THE USE OR DISTRIBUTION OF LICENSED SOFTWARE BY NAI OR ANY THIRD PARTY,
WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), INDEMNITY,
PRODUCT LIABILITY OR OTHERWISE.
<PAGE> 8
10.2 Total Liability. EXCEPT WITH RESPECT TO DAMAGES ARISING OUT OF
SECTION 8, OR SECTION 9, IN NO EVENT SHALL EITHER PARTY'S LIABILITY EXCEED THE
TOTAL AMOUNT PAID BY BOTH PARTIES UNDER THIS AGREEMENT.
SECTION 11
Dispute Resolution.
Dispute Resolution. If the parties are unable to resolve any dispute,
controversy or claim arising out of this Agreement, either McAfee.com or NAI
may, by written notice to the other, first have such dispute referred to the
Chief Financial Officer (or equivalent), or such officer's agent who is fully
empowered to act on such officer's behalf, of each party for attempted
resolution by good faith negotiations within five (5) business days after such
notice is received. If not resolved within such five (5) business day period,
the parties shall escalate the dispute to their respective Chief Operating
Officer (or equivalent), or such officer's agent who is fully empowered to act
on such officer's behalf, for resolution within fifteen (15) business days after
expiration of the initial five (5) day period. Unless otherwise mutually agreed,
the negotiations between the designated officers shall be conducted by face to
face meetings within the time periods stated above. If the parties are unable to
resolve such dispute in accordance with the aforementioned procedure or within
such twenty (20) business day period (total), either party shall have the right
to pursue settlement in a court of law consistent with Section 12.1 herein.
SECTION 12
Miscellaneous.
12.1 Governing Law. This Agreement and any dispute arising from the
performance or breach hereof shall be governed by and construed and enforced in
accordance with the laws of the state of California, without reference to
conflicts of laws principles.
12.2 Independent Contractors. The relationship of NAI and
McAfee.com established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed to (i) give either party
the power to direct and control the day-to-day activities of the other, (ii)
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint undertaking, or (iii) allow either party to create or
assume any obligation on behalf of the other party for any purpose whatsoever.
Except as expressly set forth herein, all financial and other obligations
associated with each party's activities hereunder shall be the sole
responsibility of such party.
12.3 Notices. All notices between NAI and McAfee.com shall be in
writing and delivered by hand or by certified mail, return receipt requested,
addressed to McAfee.com or NAI at the respective addresses set forth below, and
shall be effective upon receipt. Any person entitled to notice hereunder may
change its address by giving written notice to all others entitled to notice.
Notices to NAI will be addressed to:
3965 Freedom Circle
Santa Clara, CA 95054
Attn: VP of Legal Affairs
<PAGE> 9
Notices to McAfee.com will be addressed to:
Attn: General Counsel
12.4 Force Majeure. Failure on the part of either party hereto to
meet any of the terms and conditions contained herein because of any
governmental restriction, strike or major labor disturbance, war, revolution,
riot, earthquake, fire, or flood shall not constitute a breach of this Agreement
and shall excuse the party involved from any action by the other party hereto,
based upon the said failure to perform.
12.5 Waiver; Entire Agreement; Partial Invalidity. In the event
either party shall at any time waive any of its rights under this Agreement or
waive the performance by the other party of any of its obligations hereunder,
such waiver shall not be construed as a continuing waiver of the same rights or
obligations or a waiver of any other rights or obligations. This Agreement
(which includes the Schedules and Exhibits hereto) constitutes the entire
agreement between the parties as to the subject matter hereof and merges and
supersedes all prior discussions between the parties as to the subject matter
hereof. This Agreement may not be changed or terminated except by a written
amendment signed by both parties. Any provision of this Agreement that shall be
or is determined to be invalid shall be ineffective, but such invalidity shall
not affect the remaining provisions hereof. The titles to the paragraphs hereof
are for convenience only and have no substantive effect. This Agreement has been
prepared jointly by the parties and shall not be construed against one party as
the draftsman thereof.
12.6 Non-Assignability and Binding Effect. Neither party shall,
without the prior written consent of the other party, transfer or assign this
Agreement in whole or in part, whether by operation of law or otherwise, to any
third party (including affiliated companies) without the prior written consent
of the other party. Any purported transfer or assignment without such consent
shall be void ab initio. Subject to the foregoing, this Agreement will inure to
the benefit of the parties and their permitted successors and assigns.
12.7 Injunctive Relief. McAfee.com acknowledges that its failure to
perform any of the material terms or conditions of this Agreement shall result
in immediate and irreparable damage to NAI. McAfee.com also acknowledges that
there may be no adequate remedy at law for such failure and that, in the event
thereof, NAI shall be entitled to equitable relief in the nature of an
injunction and to all other available relief, at law or in equity.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original and all of which taken
together shall constitute one and the same agreement.
12.9 Compliance with Laws. In exercising their rights under this
Agreement, the parties shall fully comply in all material respects with the
requirements of any and all applicable laws, regulations, rules and orders of
any governmental body having jurisdiction over the exercise of rights under this
Agreement.
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the Effective Date.
McAfee.com Network Associates, Inc.
By: /s/ SRIVATS SAMPATH By: /s/ PRABHAT GOYAL
------------------------------ --------------------------------
Name: Srivats Sampath Name: Prabhat Goyal
Title: Chief Executive Officer Title: Chief Financial Officer
<PAGE> 11
SCHEDULE A
Hosting Services
McAfee.com shall use commercially reasonable efforts to provide
sufficient technical services to maintain the NAI website located at www.nai.com
and/or any successor site agreed to by the parties in a manner substantially
similar to those services McAfee.com provides itself in the maintenance and
support of its websites.
NAI shall pay McAfee.com a fee for such services in an amount equal to
ten percent (10%) the total of McAfee.com's total Technology Costs, as set forth
in McAfee.com quarterly financial statements, plus a ten percent (10%) service
charge.
McAfee.com shall provide such services from January 1 , 1999 until
December 31, 2000 unless otherwise agreed in writing by the parties.
<PAGE> 1
EXHIBIT 10.13
AMENDED AND RESTATED ELECTRONIC SOFTWARE RESELLER/WEB SITE SERVICES AGREEMENT
This Amended and Restated Electronic Software Reseller/Web Site Services
Agreement (the "Agreement") is made and entered into effective as of May 17,
1999, by and between Beyond.com Corporation, a Delaware corporation, formerly
known as Software.net Corporation, located at 1195 West Fremont Avenue,
Sunnyvale, California 94087 ("Reseller") and Networks Associates, Inc., a
Delaware corporation, doing business as Network Associates, Inc. located at
3965 Freedom Circle, Santa Clara, California 95054 ("Vendor").
BACKGROUND
(a) Vendor and Reseller are parties to that certain Web Site Services
Agreement dated as of September 21, 1998 and wish to Amend and Restate
such Web Site Services Agreement as set forth herein.
(b) Vendor is the owner of all rights to (or has a license to sell) the
Software and Reseller desires to purchase Software from Vendor for resale
on the Managed Site subject to the terms and conditions of this Agreement.
(c) Vendor and Reseller have entered into a certain Co-Hosting Agreement
relating to the offering of software and computer hardware from Vendor's
United States based public web site (other than the web site maintained by
Vendor at www.mcafeemall.com (or such other name as the site may be given
from time to time, including, without limitation, the "McAfee Store") (the
"Managed Site")).
(d) Vendor desires to enter into this Agreement, whereby Reseller would
purchase Vendor's product from Vendor for the purpose of reselling
Vendor's Products to End-User customers in accordance with the terms and
conditions hereof. To enhance Reseller's marketing opportunities Reseller
shall also operate and manage certain aspects of the Managed Site on behalf
of Vendor [*] as defined herein.
(e) Vendor and Reseller understand that performance requirements, and
definitions in the Co-Host Agreement dated September 21, 1998, related to
the Web Site Services Agreement dated September 21, 1998, remain and to
the extent applicable shall apply to this Amended and Restated Electronic
Software Reseller/Web Site Services Agreement. Exhibit A to this Agreement
shall supercede Exhibit E of the Co-Host Agreement to the extent of any
inconsistent terms.
NOW THEREFORE, in consideration of the foregoing, and of the mutual covenants
and agreements hereinafter set forth, the parties hereby agree that the Web
Site Services Agreement dated as of September 21, 1998 is amended and restated
in its entirety as follows:
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 2
1. DEFINITIONS.
Unless otherwise defined herein, the terms used in this Agreement shall have
the following meanings:
(a) CONTENT: means the text, pictures, sound, graphics, video and other data
that appears on the applicable web page or web site.
(b) CUSTOMIZED CONTENT: means the Vendor-specific content that is set up by
Reseller under this Agreement for the Managed Site. Customized Content shall be
subject to the prior approval of Vendor and its continued placement on the
Managed Site thereafter shall be subject to the results of the quarterly status
meetings described in Exhibit "A".
(c) VENDOR CONTENT: means the content specifically provided by Vendor to be
included in the Managed Site.
(d) RESELLER CONTENT: means content specifically provided by Reseller to be
included in the Managed Site. Reseller Content shall be subject to the prior
approval of Vendor and its continued placement on the Managed Site thereafter
shall be subject to the results of the quarterly status meetings described on
Exhibit "A".
(e) RESELLER PROPRIETARY HOST SYSTEM: means Reseller's proprietary engine that
is maintained on Reseller's servers and that permits Clients to review
literature and place orders to obtain Vendor Products via the world wide web.
(f) RESELLER TRADEMARKS: means the trademarks, service marks, trade names and
logos used and owned by Reseller.
(g) CLIENT: means a customer that utilizes the Managed Site in purchasing
Vendor Products from Reseller.
(h) VENDOR TRADEMARKS: means the trademarks, service marks, trade names and
logos used by and owned by Vendor.
(i) SOFTWARE: means retail desktop software products offered by Vendor under
the "McAfee" brand or other Vendor-owned or licensed brand, which Vendor makes
available for sale via the Internet. Software shall include both electronically
delivered software and packaged software delivered directly to the Client.
Software shall not include any subscription based services managed by Vendor
and offered on NAI Internet Sites other than the Managed Site. The term
"Product" shall have the same meaning as the term "Software".
(j) OTHER TERMS: Other capitalized terms used herein shall have the same
meaning as provided in the Co-Hosting Agreement unless the context requires
otherwise.
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<PAGE> 3
2. VENDOR OBLIGATIONS.
(a) Vendor shall establish and maintain the appropriate hypertext links from
its Online Service Page and the Vendor internet sites to the designated URL or
URLs for the Managed Site under the designation, the McAfee Mall, McAfee Store
or such other designation as may be given to the Managed Site. Such links shall
be of reasonable prominence to give sufficient notice to viewers of Vendor's
Online Service Page.
(b) Other than technical support related to Clients' purchases and downloading
of the Vendor Products, Vendor shall provide all other support to Clients,
including without limitation, the support being provided in accordance with its
current technical support policies.
(c) Vendor shall sell to Reseller, Vendor's product licenses for resale
pursuant to the terms of Exhibit A and, Vendor shall cooperate and work with
Reseller in accordance with the terms of the Miscellaneous section of Exhibit
"A" of this Agreement.
(d) U.S. Sales. Vendor shall sell all software from United States based public
web sites exclusively through the Managed Site or the Destination (as defined
in the Co-Hosting Agreement).
(e) Vendor agrees that any Software offered for sale on the Managed Site and
any Foreign Sites (as defined in Subsection (h)) must be fulfilled, at Vendor's
election, through the Managed Site, the Foreign Sites, the Destination or must
link to the Co-Host Site (as defined in the Co-Hosting Agreement). Vendor will
not advertise on the Managed Site or Foreign Site (whether with banners,
buttons or other forms of online advertising) or link directly to web sites
that are involved in the resale of software from such page on the web sites.
(f) Vendor will display on each page of the Managed Site and any Foreign Sites
a statement to the effect that the Managed Site or Foreign Site is operated by
Vendor in a marketing partnership with Reseller. The parties will agree in good
faith on the prominence and exact format of such statement on each such page
with increasing prominence to be given to such statement on the online order
pages of the Managed Site or Foreign Site with the intent that Clients would
reasonably perceive that they are purchasing Vendor's products from Reseller.
(g) Vendor will reasonably promote and operate the Managed Site and any
Foreign Sites.
(h) Right of First Refusal for [*]
(i) [*]. For each [*], Vendor shall not sell any Software or hardware from
a web site in the [*] unless Vendor first shall have provided Reseller
with written terms addressing the (1) language for displayed text, (2)
currencies supported, (3) language for customer support including
email and telephone, (4) product reseller discounts, (5) fulfillment,
(6) payment options, (7) reporting requirements, (8) uptime
requirements, (9) privacy policy (10) projected sales, (11) the launch
date for each material term [*] from the date of receipt of [*] (the
"[*]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 4
[*]"). A [*] shall mean one of the [*] set forth on Exhibit E.
(ii) First Refusal Exercise Notice. Within twenty (20) days following
Reseller's receipt of the [*] (the "Option Period") Reseller
and/or its assigns shall have the exclusive right to accept the
proposed terms of the [*] (the "Proposed Terms"). Any acceptance
by Reseller shall be made in writing and include a commercially
reasonable and detailed implementation plan. "[*]" shall include
each web sites designated by Reseller and/or its assigns pursuant
to each acceptance of Proposed Terms.
(iii) Non-Exercise. If Reseller and/or its assigns do not accept the
Proposed Terms within the Option Period, then Vendor may initiate
sales of the Software from a web site in the [*] upon the
Proposed Terms within [*] of the [*]. Vendor shall submit to
Reseller a new written [*] in accordance with the requirements of
this Right of First Refusal prior to entering any material
changes in the Proposed Terms.
(iv) Expiration of Transfer Period. Following such [*] period, if
Vendor has not initiated sales of the Software in the [*], then
no sales of the Software and no change in the Proposed Terms
shall be permitted without a new written [*] submitted in
accordance with the requirements of this Right of First Refusal.
3. RESELLER OBLIGATIONS.
(a) Reseller will build, maintain and manage the online order pages of the
Managed Site (the "Order Pages") to process orders for Vendor Products both for
electronic software download ("ESD") and for physical delivery. The structure
of the Order Pages shall be based on Reseller's standard templates, but the
graphical content, including the Customized Content will be subject to the
approval of Vendor. All buttons, links and labels for the Managed Site shall be
labeled McAfee Mall, McAfee Store or other designation approved by Vendor.
(b) Reseller shall be responsible for supporting Clients in the purchase and
fulfillment process from the Managed Site, but will not otherwise provide
product or technical support. Reseller will exercise all commercially
reasonable efforts to distribute the most current version of Vendor's Products
and other products which Vendor makes or desires to make available from the
Managed Site.
(c) Reseller shall purchase from Vendor, Vendor's Product Licenses for resale
pursuant to the terms of Exhibit A and, Reseller shall cooperate and work with
Vendor in accordance with Exhibit "A".
(d) Reseller shall undertake export and licensing restriction management in
accordance with the requirements set forth in the Co-Hosting Agreement and the
Reseller Agreement, which export and licensing restriction requirements are
incorporated herein by reference. Reseller shall
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 5
comply with all applicable laws in connection with the operation of the Managed
Site, including without limitation, laws relating to the use of information
concerning Vendor Clients. Subject to the Reseller's rights set forth in
Section 5(c) of this Agreement, Reseller shall also comply with Vendor's
on-line privacy policies to the extent commercially reasonable upon written
notice of such policies.
(e) Vendor shall be responsible for all credit card fraud activity committed
on the Managed Site. The initial risk procedures for the Managed Site are set
forth on Exhibit "C" attached hereto. The risk procedures shall be a subject in
the quarterly meetings between the parties described in Exhibit "A".
4. LICENSE.
(a) CUSTOMIZED CONTENT. Vendor grants Reseller a non-exclusive, royalty-free
license and right during the term of this Agreement, to use, reproduce,
electronically distribute, publicly display, and publicly perform the Customized
Content delivered to Reseller by Vendor only in connection with the Managed
Site. Vendor shall indemnify and hold harmless Reseller for any liabilities,
losses, damages, costs and expenses (including attorneys' fees and costs) based
on any third party claim that Customized Content infringes another's U.S.
patent, copyright, trademark, service mark, or trade secret or that said
Customized Content is defamatory or violates another's right to publicity or
privacy; provided that Reseller promptly notifies Vendor in writing of the
claim and allows Vendor to control, and fully cooperates with Vendor in, the
defense and all related settlement negotiations. Vendor shall have no liability
for any settlement or compromise made without its consent. Upon notice of an
alleged infringement, or if in the Vendor's opinion such a claim is likely,
Vendor shall have the right, at its option, to obtain the right for Reseller to
continue to exercise the rights granted under this Agreement, substitute other
software with similar operating capabilities, or modify the Software so that it
is no longer infringing. The foregoing indemnification shall not apply to
claims of infringement to the extent they arise by reason of the combination of
the software or documentation with any other product if such claim would have
been avoided but for such combination.
(b) RESELLER LINK. Reseller grants to Vendor a non-exclusive,
non-transferable, revocable, royalty-free license and right during the term of
this Agreement, to use, reproduce, electronically distribute, publicly display,
and publicly perform Reseller's hypertext link, including certain of Reseller's
graphic icon buttons and other proprietary content used in conjunction
therewith as authorized in writing by Reseller, to link Vendor's web site to
the Managed Site, provided that Vendor complies with section 9b, below.
Reseller reserves the right to terminate the foregoing right if in its sole
discretion, Vendor's usage of Reseller's hypertext link, graphic icon buttons
and other proprietary content, harms the business, image and goodwill of
Reseller.
5. PROPRIETARY RIGHTS.
(a) Vendor acknowledges that as between the parties, Reseller owns all right,
title and interest in and to all components of the Order Pages and the Co-Host
Site. Reseller acknowledges that as between the parties, Vendor owns all right,
title and interest in and to the Managed Site and its associated URLs. Vendor
acknowledges that the Reseller Trademarks are trademarks
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<PAGE> 6
owned solely and exclusively by Reseller, and agrees to use the Reseller
Trademarks only in the form and manner and with appropriate legends as
prescribed by Reseller. Vendor agrees not to use any other trademark or service
mark in connection with any of the Reseller Trademarks without prior written
approval of Reseller. All use of Reseller Trademarks shall inure to the benefit
of Reseller. Reseller acknowledges that the Vendor Trademarks are trademarks
owned solely and exclusively by Vendor, and agrees to use the Vendor Trademarks
only in the form and manner and with appropriate legends as prescribed by
Vendor. Reseller agrees not to use any other trademark or service mark in
connection with any of the Vendor Trademarks without prior written approval of
Vendor. All use of Vendor trademarks shall inure to the benefit of Vendor.
(b) Nothing in this Agreement shall give Vendor any right or license to use,
reproduce, display or distribute (electronically or otherwise) any technology
or intellectual property rights in the Order Pages and the Co-Host Site.
(c) Except as required by law, Reseller shall be entitled to use any
information that it collects regarding the visitors to and purchasers from the
Managed Site, including e-mail names, such information shall be considered
co-owned by Vendor and Reseller, with the restriction that Reseller may not
sell, license or disclose such information to any competitor of Vendor. Each
End User will be afforded the opportunity to opt-out of either or both parties'
marketing activities involving contacting such End User for promotional
purposes. The form of such opt-out feature will be mutually determined by the
parties. In the event a customer elects to opt-out of either parties' marketing
activities Reseller may not use customer information in a manner that violates
Vendor's privacy policy as published from time to time upon thirty (30) days
notice to Reseller.
6. TERM AND TERMINATION.
(a) TERM. The term of this Agreement as amended and restated on the date
hereof will be deemed to have commenced on [*], and continue in effect until
[*], unless earlier terminated as herein provided ("Initial Term"). This
Agreement will automatically be renewed for an additional one (1) year term
("Renewal Term") unless either party gives the other written notice of
termination at least ninety (90) days prior to the expiration of the Initial
Term or any Renewal Term.
(b) TERMINATION FOR CAUSE. This Agreement may be terminated by a party for
cause [*] by written notice upon the occurrence of any of the following events:
(i) If the other ceases to do business, or otherwise terminates its business
operations (or in the case of Vendor, [*];
or
(ii) If the other shall fail to promptly secure or renew any material license
registration, permit, authorization or approval for the conduct of its business
in the manner contemplated by this Agreement or if any such material license,
registration, permit, authorization or approval is revoked or suspended and not
reinstated within [*]; or
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 7
(iii) If the other breaches any material provision of this Agreement and fails
to fully cure such breach within [*] days in the case of failure to pay) of
written notice describing the breach; or
(iv) By Reseller if the [*]; or
(v) [Deleted]; or
(vi) By Vendor if the [*]; or
(vii) If the other seeks protection under any bankruptcy receivership trust
deed, creditor's arrangement composition or comparable proceeding, or if any
such proceeding is instituted against the other and not dismissed within [*].
(b1) TERMINATION BY RESELLER. Reseller may terminate the Agreement [*] if
[*] other than as a result of a breach of this Agreement by Reseller. As used in
the preceding sentence, [*] shall mean [*] and (ii) [*] shall have the same
meaning as set forth in the Co-Hosting Agreement.
(c) EFFECT OF TERMINATION. Reseller shall remit all fees due under this
Agreement to Vendor within thirty (30) days of such termination.
(d) EFFECT ON END USERS. Termination of this Agreement by either party will
not affect the rights of any End User under the terms of the End-User License
Agreement and shall not affect terms of any other agreement between the parties
except to the extent specifically provided for in such agreement.
7. PAYMENT.
Vendor shall be compensated in accordance with the terms of Exhibit "A".
8. DISCLAIMER; UPTIME REQUIREMENT.
(a) Vendor acknowledges and agrees that Reseller shall not be responsible for
Order Pages unavailability due to (i) outages caused by the failure of public
network or communications components or (ii) errors in the HTML coding in, or
any other aspect of, the electronic files provided by Vendor. [*]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-7-
<PAGE> 8
[*]. Compliance with the Uptime Requirement shall be determined with respect to
each one month period during the Term. failure to meet the Reseller Uptime
Requirement shall be grounds for termination of this Agreement without notice or
opportunity to cure.
(b) Reseller acknowledges and agrees that Vendor shall not be responsible for
Managed Site unavailability due to (i) outages caused by failure of public
network or communications components or (ii) errors in the HTML coding in, or
any other aspect of, the electronic files provided by Reseller. [*].
9. TRADEMARK USE.
(a) Reseller acknowledges that the Vendor Trademarks are trademarks owned
solely and exclusively by Vendor, and agrees to use the Vendor Trademarks only
in the form and manner and with appropriate legends as prescribed by Vendor.
Reseller agrees not to use any other trademark or service mark in connection
with any of the Vendor Trademarks without prior written approval of Vendor. All
use of Vendor Trademarks shall inure to the benefit of Vendor.
(b) Vendor acknowledges that the Reseller Trademarks are trademarks owned
solely and exclusively by Reseller, and agrees to use the Reseller Trademarks
only in the form and manner and with appropriate legends as prescribed by
Reseller. Vendor agrees not to use any other trademark or service mark in
connection with any of the Reseller Trademarks without prior written approval of
Reseller. All use of Reseller Trademarks shall inure to the benefit of Reseller.
(c) Reseller shall indemnify and hold Vendor harmless from and against any and
all liabilities, losses, damages, costs and expenses (including legal fees and
expenses) associated with any claim or action brought against Vendor that may
arise from Reseller's improper or unauthorized replication, packaging,
marketing, distribution, or installation of the Software, including claims based
on representations, warranties, or misrepresentations made by Reseller.
(d) BOTH PARTIES LIABILITY SHALL BE LIMITED TO DIRECT DAMAGES. IN NO EVENT WILL
EITHER PARTY BE LIABLE FOR INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS) SUFFERED BY THE OTHER PARTY, EVEN IF IT HAS PREVIOUSLY
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. [*]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-8-
<PAGE> 9
[*]
10. GENERAL PROVISIONS.
(a) ASSIGNMENT. This Agreement may not be assigned by either party (except by
operation of law or in connection with the sale of substantially all of the
assets of such party's business or the acquisition of such party by a third
party, and except by Vendor to McAfee.com Corporation, its majority-owned,
first-tier subsidiary) to any other person, persons, firms, or corporations
without the express written approval of the other party. Any assignee of the
Vendor shall be deemed the "Vendor" for all purposes in this Agreement
including but not limited to Section 2(d).
(b) NOTICES. All notices and demands hereunder shall be in writing and will be
deemed given upon the earlier of actual receipt or two (2) days after being
sent by overnight Federal Express or Express Mail, return receipt requested, to
the appropriate address set forth above, as such contracts and addresses may be
changed by written notice to the other party.
(c) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of California. Each party
hereto expressly consents to the personal jurisdiction of the state and federal
courts located in Santa Clara County, California, and expressly waives any
defense to any action based on inconvenient forum, choice of venue, lack of
personal jurisdiction, sufficiency of service of process or the like.
(d) RELATIONSHIP OF THE PARTIES. Each party is acting as an independent
contractor and not as an agent, partner, or joint venture with the other party
for any purpose. Except as provided in this Agreement, neither party shall have
the right, power, or authority to act or to create any obligation, express or
implied, on behalf of the other.
(e) SURVIVAL OF CERTAIN PROVISIONS. The indemnification and confidentiality
obligations set forth in the Agreement shall survive the termination of the
Agreement by either party for any reason.
(f) HEADINGS. The titles and headings of the various sections and paragraphs
in this Agreement are intended solely for convenience of reference and are not
intended for any other purpose whatsoever, or to explain, modify or place any
construction upon or on any of the provisions of this Agreement.
(g) ALL AMENDMENTS IN WRITING. No provisions in either party's purchase
orders, or in any other business forms employed by either party will supersede
the terms and conditions of this Agreement, and no supplement, modification, or
amendment of this Agreement shall be binding, unless executed in writing by a
duly authorized representative of each party to this Agreement.
(h) ENTIRE AGREEMENT. The parties have read this Agreement and agree to be
bound by its terms, and further agree that this Agreement, the Co-Hosting
Agreement and the Reseller
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-9-
<PAGE> 10
Agreement constitute the complete and entire agreement of the parties and
supersedes all previous communications, oral or written, and all other
communications between them relating to the license and to the subject hereof,
including without limitation, that certain Web Site Services Agreement dated as
of September 21, 1998. No representations or statements of any kind made by
either party, which are not expressly stated herein, shall be binding on such
party.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.
BEYOND.COM CORPORATION NETWORKS ASSOCIATES, INC.
(Formerly known as Software.net) doing business as Network Associates, Inc.
By: /s/ JAMES R. LUSSIER By: /s/ JEFF PLATON
------------------------------- ---------------------------------------
Name: JAMES R. LUSSIER Name: JEFF PLATON
----------------------------- -------------------------------------
Title: VP and GM Direct e.Commerce Title: VP Sales & Bus. Dev.
Solutions Division ------------------------------------
----------------------------
Date: 9/9/99 Date: 9/9/99
----------------------------- -------------------------------------
-11-
<PAGE> 12
EXHIBIT "A"
1. DEFINITIONS.
a) DOCUMENTATION: all computer readable collateral materials normally
provided from time to time by Vendor to End Users for use of the Software
and all subsequent versions thereof provided to Reseller pursuant to this
Agreement.
b) END-USER LICENSE AGREEMENT: the computer readable license agreement
provided by Vendor, as modified from time to time, that governs the use
of the Software by End Users, and which is to be included with each copy
of the Software sold by Reseller hereunder.
c) RESELLER MATERIALS: computer readable materials provided by Reseller for
inclusion in an electronic package containing the Software,
Documentation, and End-User License Agreement, which materials have been
approved in advance in writing, by Vendor.
d) PRODUCT: a copy of the Software, Documentation, End-User License
Agreement and Reseller Materials, if any, packaged in computer readable
form together for electronic delivery in accordance with this Agreement.
e) END USER: person(s) or entity(ies) that acquires a Product for productive
use rather than resale or distribution.
f) VENDOR TRADEMARKS: trademarks owned or licensed by Vendor.
g) TERRITORY: world wide only via the Internet on the Managed Site except
(i) countries to which export or re-export of any Product, or the direct
products of any Product is prohibited by United States law without first
obtaining the permission of the United States Office of Export
Administration or its successor, and (ii) countries that may be hereafter
excluded pursuant to the terms of this Agreement.
h) AUTHORIZED PRODUCT RETURNS: return requests received from End User
customers pursuant to the terms of the End-User License Agreement and
accompanied by executed Letter of Destruction and or a Return Merchandise
Authorization number, relating to Products distributed by Reseller or
other returns if agreed upon by Vendor.
2. LICENSE.
a) RIGHTS GRANTED TO RESELLER, Vendor grants Reseller a non-transferable,
and non-exclusive license and right to;
1. reproduce the Software, Documentation, and the End-User License
Agreement in computer readable form;
2. package the Software, Documentation, Reseller Materials and the
End-User License Agreement in a computer readable manner specified by
Vendor;
3. utilize the Vendor Trademarks in connection with the replication of
the Software, packaging and distribution of the Products, in a manner
specified by Vendor; and
4. Distribute the Products directly to End Users in the Territory subject
to the restrictions set forth in this Agreement.
b) RIGHTS RESERVED TO VENDOR. Reseller acknowledges that the Software and
Documentation are the property of Vendor or its licensors and that
Reseller has no rights in the foregoing except those expressly granted by
this Agreement. Except as expressly set forth herein and in the Web Site
Services Agreement to which this is attached, nothing shall be construed
as restricting Vendor's right to sell, license, modify, publish or
otherwise distribute the Software or Documentation, in whole or in part,
to any other person.
3. REPRODUCTION BY RESELLER.
a) REPRODUCTION AND PACKAGING. Reseller agrees to accurately replicate the
Software and Documentation provided by the Vendor in computer readable
form, and to package these items as specified by Vendor.
b) VENDOR TRADEMARKS AND LEGENDS. Reseller shall include copies of the
Vendor Trademarks, copyright notices and other proprietary rights
legends, on all copies of the Documentation and Software that it packages
in computer readable form, in the manner specified by the Vendor.
4. DISTRIBUTION BY RESELLER.
a) PACKAGING. Reseller will distribute Products to Clients of the Managed
Site the Co-Host Site and/or Destination and only as packaged in
accordance with this Agreement, with all packaging, warranties,
disclaimers and End-User License Agreements intact. Reseller will make
copies of the current End-User License Agreement available to End User
customers in computer readable form. Products distributed electronically
shall be distributed to End Users with a Vendor approved wrapper which
prohibits use of the Product by the End User prior to approval of the
End-User License Agreement and the submission of payment by End User to
Reseller.
b) PRODUCT RETURNS, SUBJECT TO SECTION 10(a). Reseller agrees to honor any
Authorized Product Returns.
<PAGE> 13
c) COST OF DISTRIBUTION. Costs relating to packing the Product for
shipment to the End User, shipping the Product to the End User, and/or
digitally delivering the Product to the End User shall be borne by
the Reseller.
5. RESELLER OBLIGATIONS.
a) Reseller will conduct its business in a manner that reflects
favorably upon the Products and Vendor. Such marketing, promotion,
sublicensing and distribution shall be performed in accordance with
all applicable laws. Without limitation on the foregoing, Reseller
will comply with all laws relating to the privacy of Internet users.
b) REVERSE ENGINEERING. Reseller agrees not to: (i) disassemble,
de-compile or otherwise reverse engineer the Software or otherwise
attempt to learn the source code, structure, algorithms or ideas
underlying the Software; (ii) take any action contrary to Vendor's
End-User License Agreement except as expressly and unambiguously
allowed under this Agreement.
c) CUSTOMER REGISTRATION. Reseller agrees to provide Vendor with
customer information regarding purchasers of Products, including any
expressed preferences regarding the use and distribution of such
information. The format and frequency of customer registration
information shall be mutually agreed to by the parties.
d) EXPORT COMPLIANCE. Reseller agrees that it will not, directly or
indirectly, export or transmit the Product and technical data (or any
part thereof) or any process or service that is the direct product of
the software and documentation, to any group S or Z country specified
in Supplement No. 1 of Section 770 of the Export Administration
Regulations or to any other country to which such export or
transmission is restricted by such regulation or statute, without the
prior written consent, if required, of the Office of Export
Administration of the U.S. Department of Commerce, or such other
governmental entity as may have jurisdiction over such export or
transmission. Reseller acknowledges that some Products contain
encryption. Some encryption Products may be exportable while others
are export restricted by the U.S. Department of Commerce's Bureau of
Export Administration (BXA). Reseller further acknowledges that for
this reason, the export of such items may subject Reseller or its
executives to fines and/or other severe penalties. Unless all
required permits and/or approvals have been obtained, Reseller shall
not export or re-export the restricted Software outside of the United
States, whether directly or indirectly, and will not cause, approve
or otherwise facilitate others such as agents, subsequent purchasers,
licensees or any other third parties in doing so. The parties agree
to cooperate with each other with respect to any application for any
required licenses and approvals and Vendor agrees to provide Reseller
current information regarding export requirements with respect to the
Products. However, Reseller acknowledges it is their ultimate
responsibility to comply with all exports laws and that Vendor has no
further responsibility after the initial sale to Reseller within the
United States.
6. VENDOR'S DELIVERY OBLIGATIONS.
a) INITIAL DELIVERABLES. Vendor shall promptly deliver the current
version of the Software and Documentation to Reseller (or Reseller's
designated agent). Vendor will provide Reseller (to Reseller's
designated agent) with (i) copies of the Software on CD-ROM or master
diskettes, (ii) Product specification information in HTML format, or
in another computer readable form that can be reproduced by Reseller,
(iii) Product Documentation in a computer readable form that can be
reproduced by Reseller.
b) NEW VERSIONS. Vendor shall provide Reseller with computer readable
copies of all new releases, updates, or revisions of the Software and
Documentation within a reasonable time after each such release is
made generally available by Vendor. Vendor will notify Reseller of
its plans for each new release, update or revision of the Software or
Documentation within a reasonable period of time prior to such
release.
c) NEW PRODUCTS. Reseller understands and acknowledges that Vendor
continues to review software products available on the market and to
conduct its own research and development activities with respect to
the internal development of such new products. Vendor makes no
representations or warranties with respect to continued availability
of any of the Software covered by this Agreement, or the nature or
availability of any future modifications, updates, or enhancements
thereto. Similarly, Vendor makes no representations with respect to
any new product offerings it may make in the future or the
compatibility of such products with the Software covered by this
Agreement.
7. VENDOR'S SUPPORT OBLIGATIONS.
a) SUPPORT FOR END USERS. Vendor will provide support to End Users of
the Software to be distributed hereunder, in accordance with Vendor's
then-current published software support policy, if any. Reseller
assumes no responsibility for Product technical support.
b) SUPPORT FOR RESELLER. Vendor will provide Reseller, without charge,
such technical information, current maintenance documentation, and
telephone assistance as is necessary to enable Reseller to
effectively reproduce, package and distribute the Software. Reseller
is not entitled to source code for the Software.
8. VENDOR'S WARRANTIES.
a) AUTHORITY. Vendor represents that it has the right and authority to
enter into this Agreement and to grant Reseller the rights to the
Software and Documentation granted in this Agreement.
b) NON-INFRINGEMENT. Vendor warrants to Reseller that the Vendor has all
rights, title, and interest in the Products or has
2
<PAGE> 14
obtained the right to grant the licenses set forth in this
Agreement. Vendor represents that to Vendor's knowledge the Product
does not infringe upon or misappropriate the proprietary rights of
any third party arising under the laws of the United States of
America.
c) END USER WARRANTIES. Vendor will provide a warranty for the End
Users of the Software as set forth in the End-User License
Agreement. Reseller is not authorized to make any other warranties
on Vendor's behalf.
d) DISCLAIMER. OTHER THAN EXPRESSLY SET FORTH HEREIN, VENDOR DISCLAIMS
ALL EXPRESS AND IMPLIED WARRANTIES WITH REGARD TO THE PRODUCTS,
INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY,
NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
9. RESELLER WARRANTIES.
a) AUTHORITY. Reseller represents that it has the right and authority
to enter into this Agreement and to perform all of its obligations
hereunder.
b) NON-INFRINGEMENT. Reseller warrants to Vendor that the Vendor has
all rights, title, and interest in any wrapping technology bundled
with the Products and that the same does not infringe upon or
misappropriate the proprietary rights of any third party arising
under the laws of the United States of America.
c) REPLICATION. Reseller agrees that it will accurately replicate the
Software and Documentation, and warrants that all Software
distributed by the Reseller will not contain any viruses, worms,
date bombs, or other code that is specifically designed to cause
the Software to cease operating, or to damage, interrupt, or
interfere with any End User's Software or data.
10. PAYMENTS.
a) AMOUNT. Reseller shall purchase from Vendor and Vendor shall sell
to Reseller Product licenses for resale to End Users, in accordance
with the terms and conditions hereof, on an as-needed basis.
Reseller will purchase the Products pursuant to a purchase order in
a form reasonably acceptable to Vendor. Reseller will pay Vendor a
Per Copy License Fee equal to [*] of the price
set forth in Price List Schedule attached hereto as Exhibit B, for
each copy of a Product delivered to an End User by Reseller,
provided, however, that no fee shall be due for Authorized Product
Returns. Vendor may change, amend, remove or modify the Products on
the Price List and/or the price set forth for any Product in its
sole discretion, upon thirty (30) days prior written notice to
Reseller. However, in the event the parties agree to adjust the
prices on the Price List upon less than 30 days notice to Reseller,
Vendor shall credit Reseller on the purchase order immediately
preceding the price adjustment. Reseller shall collect all moneys
due for sales conducted on the Managed Site and shall solely bear
the risk of collection, except as otherwise set forth in the Web
Site Services Agreement. [*] Gross Sales shall mean total moneys
received by Reseller from Product sales on the Managed Site less End
User Product returns, shipping charges paid by End User [*].
b) PAYMENT AND REPORTS. Within [*], Reseller shall provide Vendor with
a written report specifying the number of copies of Products that
Reseller has shipped during the immediately prior month and the
calculation of the [*] pursuant to Section 10(a) above together with
payment therefor. The Per Copy License Fee shall be due [*] from
invoice by Vendor.
c) TAXES. The Per Copy License Fee shall be exclusive of any tax,
withholding tax, levy or similar government charge that may be
assessed. Such taxes, withholding taxes, levies, and governmental
charges include taxes based on sales, use, excise, import or export
values, value-added, income revenue, net worth, or may be the
result of delivery, possession or use of the Software ("Taxes").
Reseller agrees to pay all such Taxes that become due based on
Reseller reselling the Products. Should any such Taxes be or become
due, Reseller agrees to pay such Taxes and indemnify Vendor for a
claim against Vendor by any taxing authority for Taxes arising in
connection with this Agreement other than Taxes on Vendor's income.
Reseller shall make no deduction from any amounts owed to Vendor
for any Taxes. Reseller agrees to provide Vendor with appropriate
information and/or documentation satisfactory to the applicable
taxing authorities to substantiate any claim of exemption from any
Taxes. If Reseller claims any exemption from Taxes, Reseller shall
provide Vendor with a valid certificate evidencing such exemption.
Reseller will pay, or require its End User customers to pay, all
federal, state and local taxes designated, levied, or based upon
the resale of Products by Reseller. Reseller will collect and remit
to the appropriate authorities all federal, state and local taxes
designated, levied, or based upon the resale of Products by
Reseller as required by applicable law, and shall indemnify Vendor
against all Taxes that arise with respect to the resale of the
Software to End Users.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 15
d) CLIENT INFORMATION. Reseller will provide to Vendor within ten (10)
days after the end of each month, a report for the immediately prior
month showing (i) the name and address of each End User that
purchased the Product from Reseller, and (ii) the name and quantity
of the Product purchased by the End User. The format of this
information shall be mutually agreed to by the parties.
e) BOOK AND RECORDS. Reseller agrees to maintain adequate books and
records relating to the distribution of Products to End User
Customers. Such books and records shall be available at their place
of keeping for inspection by Vendor or its representative, for the
purpose of determining whether the correct fees have been paid to
Vendor in accordance with the terms of this Agreement, and whether
Reseller has otherwise complied with the terms of this Agreement.
Vendor shall have the right to conduct such an audit upon ten (10)
days advance notice twice each year. In the event that such an audit
discloses an underpayment of more than five percent (5%), then
Reseller shall pay the costs of such audit.
11. CONFIDENTIALITY.
Each party agrees that all binary code, inventions, algorithms,
know-how and ideas it obtains from the other and all other business,
technical and financial information it obtains from the other are the
confidential property of the disclosing party ("Confidential
Information"), if conspicuously labeled as "proprietary" or
"confidential" or some similar designation or, if disclosed orally or
visually, is confirmed in writing labeled as "proprietary" or
"confidential" or some similar designation within thirty (30) days of
such oral or visual disclosure. All binary code (including, but not
limited to the Software), binary documentation and underlying
inventions, algorithms, know-how and ideas are hereby identified as
Vendor's Confidential Information. Except as expressly and
unambiguously allowed herein, the receiving party will hold in
confidence and not use or disclose any Confidential Information and
shall similarly bind its employees and contractors in writing. The
receiving party shall not be obligated under this Section 11 with
respect to information the receiving party can document; (1) is or
has become readily publicly available with restriction through no
fault of the receiving party or its employees or agents; or (2) is
received without restriction from a third party lawfully in
possession of such information and lawfully empowered to disclose
such information; or (3) was rightfully in the possession of the
receiving party without restriction prior to its disclosure by the
disclosing party; or (4) is independently developed by the receiving
party by employees without access to the other party's similar
Confidential Information; or (5) is required by law or order of a
court, administrative agency or other governmental body to be
disclosed by the receiving party. The parties obligations with
respect to Confidential Information (other than with respect to any
source code as to which the obligations shall continue for twenty
(20) years) shall continue for the shorter of three (3) years from
the date of termination of this Agreement or until one of the above
enumerated conditions becomes applicable. Each party acknowledges
that its breach of this Section 11 would cause irreparable injury to
the other for which monetary damages are not an adequate remedy.
Accordingly, a party will be entitled to injunctions and other
equitable remedies in the event of such breach by the other.
12. VENDORS TRADEMARKS.
USE. Reseller acknowledges that as between Vendor and Reseller the
Vendor Trademarks are the sole and exclusive property of Vendor or
its licensors. Reseller agrees to use the Vendor Trademarks only
in the form and manner and with appropriate legends as prescribed by
Vendor. Reseller agrees not to use any other trademark or service
mark in connection with any of the Vendor Trademarks without prior
written approval of Vendor. All use of Vendor Trademarks shall inure
to the benefit of Vendor. Reseller shall not remove, alter, cover or
obfuscate any copyright notice or other proprietary rights notice
placed in or on the Software or Documentation by Vendor.
13. INDEMNIFICATION.
a) BY VENDOR. Vendor will defend, indemnify and hold Reseller harmless
from and against any and all liabilities, losses, damages, costs and
expenses (including legal fees and expenses) associated with any
claim or action brought against Reseller for actual or alleged
infringement of any US patent, US copyright, US trademark, US service
mark, trade secret, or other US proprietary rights based upon the
duplication, sale, license, or use of the Software or Documentation
by Reseller in accordance with this Agreement, provided that Reseller
promptly notifies Vendor in writing of the claim and allows Vendor to
control, and fully cooperates with Vendor in, the defense and all
related settlement negotiations. Vendor shall have no liability for
any settlement or compromise made without its consent. Upon notice of
an alleged infringement, or if in the Vendor's opinion such a claim
is likely, Vendor shall have the right, at its option, to obtain the
right for Reseller to continue to exercise the rights granted under
this Agreement, substitute other software with similar operating
capabilities, or modify the Software so that it is no longer
infringing. In the event that none of the above options are
reasonably available, in Vendor's sole opinion, Vendor may terminate
this Agreement.
b) BY RESELLER. Reseller shall indemnify and hold Vendor harmless from
and against any and all liabilities, losses, damages, costs and
expenses (including legal fees and expenses) associated with any
claim or action brought against Vendor that may arise from Reseller's
improper or unauthorized replication, packaging, marketing,
distribution, or installation of the Software, including claims based
on representations, warranties, or misrepresentations made by
Reseller, or any other improper or unauthorized act or failure to act
on the party of Reseller.
<PAGE> 16
14. MISCELLANEOUS
(a) Reseller will provide Vendor with daily reporting on sales numbers via
email. Reseller will make a confidential online reporting tool available
to Vendor for Vendor's own internal use only.
(b) Both Vendor and Reseller will use all commercially reasonable efforts to
maximize product sales through the relationship. The parties shall meet
quarterly within the second two weeks of the first month of each quarter to
(i) determine Managed Site's financial performance against performance
goals; (ii) discuss Vendor's implementation of Beyond.com technologies;
(iii) discuss Vendor purchasing of desktop software from Beyond.com and
(iv) discounts on pricing to Reseller for ESD Products, and (v) discuss
on-going business development opportunities and Managed Site Product sale
growth strategies. The parties shall consult in good faith concerning
financial performance goals for the Managed Site, the location on the
Vendor public sites of links to the Managed Site, risk levels, the Content
on the Managed Site and all other matters pertaining to the operation of
the Managed Site.
(c) Reseller and Vendor will develop mutually desirable programs and offers
targeted to customers visiting the Managed Site.
<PAGE> 17
EXHIBIT "B"
PRICE LIST
<PAGE> 18
EXHIBIT "C"
INITIAL RISK LEVEL
The initial risk level, as defined by Cybersource Corporation in
connection with its IVS fraud service as in existence on the date hereof, shall
be a [*], subject to adjustment by mutual agreement of the parties in writing.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 19
EXHIBIT "D"
FOREIGN TERRITORIES
[*]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated August 20, 1999, relating to the financial statements of McAfee.com
Corporation, a wholly owned subsidiary of Networks Associates, Inc., which
appear in such Registration Statement. We also consent to the references to us
under the headings "Experts" and "Selected Financial Data" in such Registration
Statement.
PricewaterhouseCoopers LLP
San Jose, California
September 23, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 1,087 1,519
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,373 11,567
<PP&E> 124 2,797
<DEPRECIATION> (59) (348)
<TOTAL-ASSETS> 2,438 14,016
<CURRENT-LIABILITIES> 7,569 25,510
<BONDS> 0 0
0 0
0 0
<COMMON> 36 36
<OTHER-SE> (5,167) (11,530)
<TOTAL-LIABILITY-AND-EQUITY> 2,438 14,016
<SALES> 6,292 9,332
<TOTAL-REVENUES> 6,292 9,332
<CGS> 3,705 6,234
<TOTAL-COSTS> 3,705 6,234
<OTHER-EXPENSES> 4,580 13,760
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,993) (10,662)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,993) (10,662)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,993) (10,662)
<EPS-BASIC> (0.06) (0.30)
<EPS-DILUTED> (0.06) (0.30)
</TABLE>
